Tuesday, August 31, 2010

Senate Passes $600 Million Border Security Package

US News & World Report

The Senate took a short break from recess for a special session Thursday to pass a $600 million border security package. Members also adopted a resolution honoring the late former Sen. Ted Stevens, who was killed in a plane crash this week.

The bill, sponsored by Democratic Sens. Chuck Schumer and Claire McCaskill, will deploy 1,500 enforcement personnel to the U.S.-Mexico border and fund increased intelligence and unmanned surveillance vehicles, or drones, along the border. The measure will give $196 million to the Department of Justice to pay for U.S. attorneys, legal expenses, and a federal prison system for illegal immigrant felons, among other security measures. The bill will be paid for by increasing fees on temporary skilled worker visas for companies who have a majority of their employees in the states on these visas. [See who is giving money to Schumer's reelection campaign.]

"This bill is an answer to the problem in Arizona," said McCaskill at a press conference last week after she and Schumer introduced the measure. Senate Majority Leader Harry Reid said that while passing the measure is a success, there is still more work to be done. "Increased enforcement along our borders is only one part of a sound, comprehensive solution to fix our broken immigration system," Reid said in a statement following the bill's final passage.

The bill now heads to the White House for President Obama's signature.

This is the second time this week that Congress has interrupted recess to vote on this legislation. House Speaker Nancy Pelosi called members of her chamber back to Washington on Tuesday to approve the measure and to pass a $26 billion state aid bill. However, only two senators, Schumer and Democrat Ben Cardin, returned to the Senate floor Thursday because the bill only required a unanimous consent, where by members do not have to be physically present.

The border security bill was welcomed with bipartisan support, as immigration reform is likely to be a hot topic of debate on the campaign trail where many members of Congress will be spending their recess. After it was first approved by the Senate last week, McCaskill said, "What a relief that the Senate is still capable of passing measures that are really needed without playing political games." The Senate returned to recess immediately after the vote and will reconvene in September.

Medicines, Fresenius, Genzyme, Boeing, Google, Puma: Intellectual Property


Medicines Co. won a court ruling that may provide an additional four years of patent protection on its anticoagulant drug Angiomax, which accounts for almost all of the company’s revenue.

U.S. District Judge Claude Hilton in Alexandria, Virginia, said the Patent and Trademark Office misinterpreted federal law when it found that Medicines Co. missed a deadline to file to extend the patent term.

Medicines Co. sued in March after the patent office refused to grant the extension and instead said the patent would expire May 23. Under that decision, generic versions could have been sold as early as November. U.S. sales of Angiomax accounted for 95 percent of Medicine Co.’s revenue last year.

The company said the patent should remain in effect until December 2014 to compensate for the time it took to get regulatory approval for Angiomax.

The dispute focused on how government agencies calculate deadlines. Under federal law, drugmakers have 60 days to seek extensions on the life of their patents to compensate for the time it takes to get regulatory approval for medicines. Angiomax was approved by the Food and Drug Administration in December 2000 and the company sought the extension.

The patent office said that the application was two days late and refused the request. Parsippany, New Jersey-based Medicines Co. denied that it missed the deadline, saying the FDA and patent office counted wrong.

“Congress intended for the applicant to have 60 days,” Hilton wrote. “The PTO interpreted the statute in a manner that deprives the applicant the 60 days that Congress intended for them to receive.”

Part of the argument has been whether the 60-day requirement means calendar days or business days. Hilton said it should mean business days.

Yesterday Judge Hilton ordered the patent office “to consider the Medicines Company’s patent term extension application timely filed.”

Teva Pharmaceutical Industries Ltd., the world’s biggest generic-drug maker, and Fresenius SE’s APP Pharmaceuticals are seeking to sell copies of Angiomax and oppose any extension. Medicines Co. has sued the companies, claiming the generic versions would infringe another patent that expires in 2029.

The patent covers the composition of matter, meaning the drug’s active ingredient, and “is the one that’s considered unassailable” to blocking generic competition, Chief Executive Officer Clive Meanwell said in a March 22 interview.

Angiomax had U.S. sales of $382.9 million, or 95 percent of total revenue, and $18.3 million outside the U.S. in 2009. The company’s only other medicine, Cleviprex to control severe blood pressure in people having a stroke or heart attack, was introduced in September and has since been subject to recalls.

Medicines Co. has cut 61 jobs and halted trials of Angiomax for open-heart surgery, clogged arteries in the legs and in preventing strokes, Meanwell said in March. The medicine is injected in patients undergoing emergency angioplasty surgery to reduce heart attacks or blood clots during the procedure.

The case is The Medicines Co. v. Kappos, 10cv286, U.S. District Court for the Eastern District of Virginia (Alexandria).

Patients Ask Government to Open Genzyme’s Fabrazyme Patents

A group of patients with a rare enzyme disorder have asked the Department of Health and Human Services to break Genzyme Corp.’s exclusive license to the patent for the drug that treats their illness.

The patient group, represented by C. Allen Black Jr., of Allison Park, Pennsylvania, said Genzyme’s Fabrazyme is the only effective treatment for Fabry disease. They submitted their petition to the government Aug. 2.

Their disorder, the result of a genetic defect, leaves patients missing an enzyme needed to metabolize fats properly and leads to kidney failure and degenerative heart disease. The disease affects 1 in 40,000 to 60,000 males, and, less frequently, females, according to the National Institutes of Health. Untreated, most patients with the disease don’t live past the age of 50.

Genzyme, based in Cambridge, Massachusetts, and the world’s largest maker of enzyme-replacement therapies, began rationing Fabrazyme after production was cut following the discovery in June 2009 that the plant where the drug was produced was contaminated with a virus. Then in November contaminants were found in a batch of Genzyme’s Fabrazyme. Genzyme is still unable to meet the demand for the drug, and members of the patient group say their dosage has been cut by 70 percent, leaving them with a return of symptoms and risk of cardiac and renal failure.

In June, the company said in a regulatory filing that it couldn’t produce enough Fabrazyme to meet demand for the next three months. The company agreed to pay $1.75 million to the U.S. government for manufacturing violations at the plant, and must have special government oversight of its manufacturing process for seven years, according to the petition.

The patient group asked that Genzyme’s exclusive license to patents 5,356,804 and 5,560,757 be opened so that “responsible entities” could use the technology to make, import, export and sell the drug. Under a provision of the 1980 Bayh-Dole Act that permits entities whose research is funded with federal dollars to retain title to inventions stemming from that research, the patients are asking that additional licenses be granted.

“If we are able to interest manufacturers, we can end or lessen the shortage,” Black said in an e-mail. In the event Genzyme rectifies its problem, a backup supplier is needed so that if the company runs into trouble again, “there is still a drug source for patients.”

According to the database of the U.S. Patent and Trademark Office, the two patents were issued to the Mt. Sinai School of Medicine of the City University of New York.

Genzyme didn’t immediately respond to an e-mailed request for comment. In a June 29 regulatory filing, the company said it would have a shortage of the drug through September, making Fabrazyme unavailable “in many regions.” The company said it expected the available supply of the drug “will increase later in the year.”

The Massachusetts company has begun takeover talks with Sanofi-Aventis SA.

Boeing Receives U.S. Patent on Pivotable Aircraft Engine

Boeing Co., the world’s biggest aerospace company, received a patent for a technology that permits an aircraft engine to pivot while in use on the aircraft.

Patent 7,766,275, one of 5,070 U.S. patents issued Aug. 3, is for an aircraft with an engine connected pivotally to the fuselage adjacent to the plane’s rear end. Having an engine that can be pivoted can facilitate maneuvers between vertical and forward flight, according to the patent.

This configuration can also improve landing and takeoff, Boeing says in the patent, and will facilitate aircraft assembly and maintenance. A pivotable engine can be accessed from the ground more easily than one in a fixed position, according to the patent.

Boeing applied for the patent in June 2006. No outside counsel is listed on the patent.


AOL Loses Trademark Challenge Over Advertising.com

AOL Inc. lost a trademark challenge to a California advertising-services company.

The 9th U.S. Circuit Court of Appeals overturned a lower court that had ordered Advertise.com to stop using a name that was “confusingly similar” to AOL’s Advertising.com trademarks.

In the appeals court’s Aug. 3 ruling, Circuit Judge Betty B. Fletcher wrote that AOL’s advertising.com mark wasn’t sufficiently distinctive to be worthy of protection. She said the lower court abused its discretion by granting AOL’s request to bar the use of advertise.com.

The case is Advertise.com Inc., v. AOL Advertising Inc., 10-55069 and 10-55071, 9th U.S. Circuit Court of Appeals (San Francisco). The lower court case is Advertise.com Inc., v. AOL Inc., 2:09-cv-05983-VBF-CW, U.S. District Court, Central District of California (Los Angeles).

Google to Allow Trademarks as Keywords Following EU Ruling

Google Inc. will allow advertisers on its sites across Europe to use trademarked terms as “keywords” that link Internet searches to ads.

The policy change brings Google’s trademark practice in Europe in line with company rules in about 190 countries, including the U.S., Canada, the U.K. and Ireland. The change, effective from Sept. 14, follows a ruling by the European Union’s highest court in March that Google doesn’t breach EU law by selling trademark-protected names as keywords.

“This change allows us to harmonize our policies across the world,” said Ben Novick, a spokesman for Google, in a statement yesterday. “Users will benefit by seeing more relevant ads following a search on Google.”

The Luxembourg-based European Court of Justice, the highest court for the 27-nation EU, had ruled search engines such as Google could be liable for trademark breaches if they are aware of storing infringing terms and fail to act. LVMH Moet Hennessy Louis Vuitton SA had accused Google of violating the luxury- goods maker’s trademark rights by selling protected words as keywords that then link users to websites selling counterfeit items when they search under the company’s brands.

Google, which is based in Mountain View, California, gets most of its revenue from advertising.

While the March ruling cleared Google of violating EU trademark rules, it left it up to national courts to analyze on a case-by-case basis whether the role played by Google as an Internet host is “of a mere technical, automatic and passive nature” in processing potentially infringing data.

Google said yesterday any trademark owner that believes a third-party ad in Europe confuses users about the origin of the good or service can also file a complaint. The ad will be removed if Google agrees, it said.

The March ruling had been the first time the EU’s top court ruled on the rights of companies such as LVMH to prevent search engines in the 27-nation region from distributing protected names as keywords.

Google stores ad content on its systems, which the court said may make the company liable for trademark breaches if national judges find it plays an “active role” in creating the promotions.

LVMH had accused Google of violating the luxury-goods maker’s trademarks by linking users who search for “Vuitton” and “LV” to Web sites selling counterfeit fashion accessories.

Puma Sued, Accused of Infringing Keds’ Stripe Trademark

Puma AG Rudolf Dassler Sport’s Puma North America unit was sued for trademark infringement by Collective Brands Inc.’s Stride Rite unit.

The case involves a stripe used on Keds shoes. Stride Rite’s SR Holdings LLC, which holds the trademark, said the “power stripe” at issue has been used on Keds footwear since 1968.

Puma’s Alexander McQueen Scarred Street Shoes contain “numerous replicas” of the stripe, according to the complaint filed Aug. 3 in federal court in Boston. Puma hired U.K. designer Alexander McQueen in 2005 to create a line of shoes. McQueen died in February 2010.

SR claimed Puma has been aware of the alleged infringement since June 2009 and “refused to cease selling shoes that bear SR’s protected design,” according to court papers. The alleged infringement is confusing customers and “greatly and irreparably damaging” SR, the company said.

The Alexander McQueen Scarred Street shoe to which SR objects sells for $175, according to the Puma website. The Pro- Keds with the stripe sell for $45 at the Keds.com website.

In addition to seeking a court order barring future infringement of the trademark, SR asked the court to demand impounding and destruction of all allegedly infringing Puma products and promotional materials. The company also asked for money damages, including extra damages to punish Puma for its actions, and for awards of attorney fees and litigation costs.

SR is represented by Steven M. Bauer, Kimberly A. Mottley and Sandra J. Badin of New York’s Proskauer Rose LLP.

The case is SR Holdings LLC v. Puma North America Inc., 1:10-cv-11301, U.S. District Court, District of Massachusetts (Boston).

Monday, August 30, 2010

Legal Strategies Unveiled at Oil Spill Hearings

The Wall Street Journal

For five days last week, federal investigators grilled witnesses to answer key questions about the disastrous explosion of the Deepwater Horizon drilling rig: Why did it happen? How can we make sure it never happens again?

But in their questions to witnesses, lawyers for the companies under scrutiny—BP PLC, Transocean Ltd. and Halliburton Co.—focused on testimony that might answer another question: Who will pay?

The April 20 blast, which killed 11 workers and set off the worst offshore oil spill in U.S. history, has prompted hundreds of lawsuits against more than a dozen companies and individuals.

The hearings, which began last spring outside New Orleans and continued last week in a nondescript hotel conference room here, have previewed the years of legal drama to come. Nominally a fact-finding investigation led by the Coast Guard and Interior Department, the process has allowed lawyers from all parties to dig for evidence, test out theories and read into the record snippets of information carefully chosen for their headline-grabbing potential.

"The facts are out now," said David Pursell, managing director at Tudor Pickering Holt & Co., an energy-focused investment bank in Houston. "People are positioning for the pending deluge of lawsuits."

The investigative board will produce a report—expected next year—and could recommend that charges be filed by the Justice Department. Its hearings are to resume in October.

The board's earlier hearings were relatively staid and filled with technical discussions. But the hearing last week prompted company lawyers to make speeches (to make a broader point) and to loudly object whenever their opponents did the same. Many witnesses have remained on the stand for hours, and the board recently recruited a retired federal judge to help maintain order.

That judge, Wayne Andersen, pleaded with lawyers on Friday morning to stay focused on the government board's fact-finding mission following a day of especially sharp exchanges. The hearing, Mr. Andersen said, had come to resemble a "trial hearing, as if this were an adversarial proceeding."

BP in particular has seized on the hearings to deflect attention back onto its contractors, especially Transocean, which owned the rig, and Halliburton, which performed cement jobs on the well.

BP lawyers have focused on the rig's blowout preventer, the towering stack of valves on the sea floor designed to shut down a well in an emergency. What caused the failure of the device, which is owned and maintained by Transocean, remains a central mystery in the Gulf disaster.

Transocean witnesses have testified to some problems with the blowout preventer, including hydraulic leaks, though they consistently have said the device had been tested repeatedly and was in good working order.

Still, BP scored points on Wednesday when it got Transocean officials to say that the blowout preventer had not gone through an extensive certification process as required by federal regulations. BP representatives quickly distributed copies of those regulations to members of the press covering the hearing. And, under questioning from BP lawyers, Transocean also testified they had the responsibility for keeping the well under control.

Transocean lawyers, for their part, tried to show that BP made most of the decisions on the well, either on the rig or from the company's Houston offices.

In hearings last month, Transocean attorney Miles Clements repeatedly pushed one of BP's mangers on the rig, Ronald Sepulvado, as to who was in charge.

"You were the top, top ranking man on the rig in the hierarchy, were you not, sir?" Mr. Clements asked.

"Well, you know, everybody's on the same level," Mr. Sepulvado replied.

Mr. Clements tried again: "Would you say the buck stopped with you on the rig?"

"Well, sometimes it did and sometimes it didn't," said Mr. Sepulvado, who added that workers talked through any disagreements.

"Sure. And at the end of those discussions, would you be the one to decide what to do?" Mr. Clements finally asked.

"Yes," came the answer.

The battle between BP and Halliburton has also been intense. Halliburton designed and pumped a cement seal that experts believe may have failed and allowed explosive natural gas to enter the well, then reach the rig.

On Tuesday, BP cited emails by Halliburton workers saying that the cement operation had been successful. Jesse Gagliano, a Halliburton engineer, testified that the emails referred to the process of pumping the cement and did not predict whether it would form an effective seal.

By Thursday, the tenor of the hearings deteriorated when Halliburton lawyer Donald Godwin accused BP deepwater operation manager David Sims of "lying" during questioning. The charge prompted raised voices and arguments among the two-dozen lawyers participating in the hearing.

Mr. Andersen later admonished all parties to behave.

"A certain amount of theatrics makes the day more interesting," he said, "but it inhibits the witness and prevents us from getting good information. If we can restrain ourselves from arguing with the witnesses and any theatrical behavior, that would be helpful."

Asked for response to the legal strategy evidenced in the hearings, a BP spokeswoman said the company "will continue to cooperate with this and other government sponsored investigations into this tragedy." A Halliburton spokeswoman said the company is confident it completed its work in accordance with BP's specifications and that Halliburton continues to cooperate with all investigations. Transocean declined to comment.

Hinting at Strategy the key firms involved in the Gulf oil spill have dueled at the government's fact-finding hearings:



Oil & Gas producer

Market cap: $113.4 billion

Role in incident: Owner of the well, called Macondo, being drilled by the Deepwater Horizon.

Key testimony: A BP engineer testified that he never opened a report from Halliburton explaining that the cement job could allow gas to enter the well.

Transocean Ltd.

Zug, Switzerland

Oil & gas drilling

Market cap: $16.6 billion

Role in incident: Owner of the Deepwater Horizon drilling rig, including its equipment such as the blowout preventer; contracted to drill the well for BP Plc

Key testimony: A Transocean manager acknowledged that the company is responsible for "well control."

Halliburton Co.


Oil & gas equipment and services

Market cap: $26.6 billion

Role on Deepwater Horizon: Designed and poured the cement seal that was supposed to keep gas out of the well.

Key testimony: Halliburton officials acknowledged emails from their engineers saying that the cement operation had been successful, though evidence increasingly indicates that there was a problem with the cement.

Saturday, August 28, 2010

Judges Crack down on Inappropriate Clothes in Court

USA Today

If you're headed to traffic court in Bakersfield, Calif., better leave the flip-flops at home.

Have a court appearance in district court in Inkster, Mich.? Jeans are on the not-to-wear list.

And don't even think of wearing short shorts to court in Dover, Del.

Judges in those jurisdictions and others across the USA are cracking down on skimpy, sloppy or what they consider inappropriate attire in an effort to maintain decorum and beef up security.

A Delaware provision that bars skirts shorter than 4 inches above the knee when standing "sounds like Catholic school," says Timothy Fautsko, who advises courts on security issues for the National Center for State Courts. But, he says, the dress codes serve a purpose.

"I think it maintains order in the courtroom," he says.

Fautsko says some people seem determined to push the fashion envelope.

"I had a report of one court that had an individual keep coming into court dressed like a clown," he says. "Again, that pushes the dignity of the court."

Courts are a place where serious business is conducted, and that demands appropriate attire, says Delaware Superior Court Judge William Witham Jr.

"We're not out to treat people as school kids, but we do expect if you come to court, you need to treat it with the appropriate respect and dignity it should deserve due to the occasion," he says.

Among recent examples:

• In May, Jennifer LaPenta was jailed briefly after a judge in Lake County, Ill., held her in contempt for wearing an offensive T-shirt to court.

• In Inkster, Mich., Joseph Kassab was turned away in April from the courtroom for wearing black jeans. He missed his traffic court appearance and was fined, and he's challenging the dress code in the state Court of Appeals.

• The same thing happened to Linda West, who missed her court date after being refused entry in June to court in Bakersfield, Calif., for wearing flip-flops.

• In July, in Hamilton County (Ohio) Municipal Court, William Morse's T-shirt featuring slasher-movie character Chucky and the words "Say goodbye to the killer" earned Morse a warning that he'd spend a day in jail if he came to court again with inappropriate attire.

Though some attire may seem obvious choices to ban, other clothing can be a tougher call — and barring some attire can raise troubling questions about race, religion and access to justice, legal experts say.

"It would seem inappropriate to have the security officers be the determiner unless it's a safety issue … especially when the result could be they miss their court appearance and are subject to a penalty. That would be questionable," says Micah J. Yarbrough, a professor at Widener University School of Law.

Many dress codes single out baggy pants, particularly those that expose undergarments. That fashion began in the African-American community, says Holly Alford, an assistant professor in the department of fashion design and merchandising at Virginia Commonwealth University.

Banning such attire is "almost like you're making racial statements without actually saying it," says Alford — who admits she pesters her son daily to pull up his pants.

Fautsko says an increasing numbers of courts are adopting dress codes, and for security reasons some specify that faces be uncovered, posing problems for Muslim women wearing veils or burqas. That issue has come to the fore among judges and security personnel in the past six months, he says, adding that courts are "seeking some definitive direction on what to do, and what to do in a uniform manner, so it's not different from court to court."

Ibrahim Hooper, spokesman for the Council on American-Islamic Relations, says courts can follow the lead of the Transportation Security Administration and have a female officer take a Muslim woman to a private setting where she can remove her face covering.

"There should be no issue for anyone entering a court with either a face veil or a head scarf," Hooper says.

Dress codes can play a role in public safety. For instance, gang-related clothing or gang colors could be used to intimidate witnesses in criminal cases.

Dress codes pose few problems for defense attorneys, according to Brendan O'Neill, Delaware's chief public defender. Most lawyers customarily advise clients about proper attire, he says, and many will supply garments to indigent clients.

Gayle V. Fischer, a professor at Salem State University, has written extensively on the history of clothing and society. In her view, court dress codes are the product of a casual society and ignorance of court culture.

A pajama-clad woman who was turned away from court in Delaware "probably wears that outfit to the grocery store," Fischer says. "Dressing up, that's something that you're taught, and if you don't live or participate in any of the arenas where you need to dress up, you probably just don't think about it."

Thursday, August 26, 2010

Judge's Ruling sets back Stem Cell Research

San Francisco Chronicle

Talk about judicial activism. U.S. District Judge Royce Lamberth just ruled that the federal government can't fund any stem cell research because it destroys embryos. He voided not just President Obama's stem cell policy, but former President George W. Bush's policy, too.

Lamberth relied on a reading of the Dickey-Wicker Amendment, which forbids federal funding of "research in which a human embryo or embryos are destroyed." The anti-abortion community is ecstatic, but the ruling goes far further than even Bush's policies on stem cells. Bush approved federal funding of research on stem cell lines that existed by August 2001. It's unlikely that even this policy would be allowed under Lamberth's reasoning.

The Obama administration is already planning an appeal, as it should. Congress could, and should, easily clarify things by simply passing a stem cell funding bill. That would eliminate the need to go through the courts, and the bill would be unlikely to encounter a presidential veto this time around.

In the meantime, the scientific community is frustrated and confused. The California Institute for Regenerative Medicine will be able to press on with its embryonic stem cell research, thanks to the wisdom of California's voters. But it means the institute's scientists won't be able to collaborate with those whose funding was dependent on federal grants.

Congress should move quickly to ensure that this potentially valuable research can continue.

Tuesday, August 24, 2010

Grads Taking Law Schools to Task for Poor Job Market

USA Today

Law schools, once viewed as a guaranteed path to a high-paying career, are coming under fire as disillusioned graduates find a tighter job market than they say they were led to expect.

A small but growing coalition of graduates, on blogs with names like "Scammed Hard" and "Shilling Me Softly," blame their alma maters for luring them into expensive programs by overstating their employment prospects.

In July, Law School Transparency, a non-profit founded by two Vanderbilt law students, requested that 200 schools submit salary and employment data for 2010 grads, which they aim to post online.

One recent grad even went on a hunger strike on Aug. 5. "We have a new crop starting, and no one's telling them anything about this," says Zenovia Evans, 28, of Denver, who uses the name "Ethan Haines" on her blog, UnemployedJD.com.

The first in her family to finish college, she says that "no one wants to say, 'Hey, career office, you failed me,' " but "I couldn't take this lying down." She says she owes more than $150,000 in loans.

The American Bar Association, which accredits law schools, acknowledges such concerns. A report in November, noting the average student borrowed $59,324 for a public law school and $91,506 for a private one in 2007-08, cautioned prospective students to "have a clear picture of the debt they will incur and the expected earning power."

Among 2009 graduates, 88% are employed, down from 92% in 2007; they were more likely than in previous years to hold part-time or temp jobs or those not requiring a law degree, says the non-profit National Association for Law Placement. Summer job openings for second-year students, often the first step to getting hired full time, "shrank dramatically" this year, it says.

Meanwhile, the number of law school applicants for this fall rose 2.2% to more than 87,000.

Ohio University economist Richard Vedder says the question goes beyond law. "We are entering the age of the overeducated American, the person with college degrees who cuts hair, trims trees, drives trucks," he says.

Kelsey May, a 2010 University of Tulsa law school grad and co-author of What the L? 25 Things We Wish We'd Known Before Going to Law School, agrees law school can be tricky to navigate but says the anger is "misplaced. ... There should be some level of (personal) responsibility."

Accredited schools typically collect and post information about recent graduates using ABA surveys. But data can be incomplete — and misleading. Even with widely reported hiring cutbacks, "we had some schools reporting 100% employment," probably because unemployed grads didn't respond, says Donald Polden, Santa Clara University law school dean. He chairs an ABA committee on legal education and admissions that is now looking at how to report data to law firms "in a more robust way."

Georgetown Law student Roger Gordon, who says he has racked up $175,000 in loan debt, wants more than that. In June, he petitioned the Supreme Court to decide whether people who take the bar exam even need three years of law school. "If you count on law schools to do the right thing, you're going to be waiting a long time," he says.

Billionaire Donald Bren's Children say they Grew Up Hurt, Seek Cash

USA Today

Jennifer Gold and her son David Leroy Bren, whose father is billionaire developer Donald Bren. David, 18, and Christie Alexis Bren, 22 (not shown) are each seeking retroactive support of $400,000 a month from the Irvine Co. chairman.
Two adult children who are suing their billionaire father for part of his fortune say they grew up angry and hurt because they didn't know their father.

Irvine Co. Chairman Donald Bren greeted his adult children with a handshake in the courtroom.

Christie Bren, 22, and brother David Bren, 18, are seeking $400,000 a month each in retroactive child support for the years 1988 to 2002, which adds up to about $134 million.

Their mother, Jennifer Gold, is the billionaire's ex-girlfriend. She sued in 2003 alleging fraud and breach of contract on behalf of her children when they were minors.

Christie Bren acknowledged she never lacked for material things growing up in Beverly Hills but felt sad and abandoned because of her father's absence.

Her brother said his friends had their fathers around them and he did not.

"I had a lot of anger in me," he said. "I just felt like I was missing out on something I didn't really understand."

David Bren said he was 4 or 5 years old when he last saw his father, before the litigation started, so he was too young to remember much about him.

Donald Bren's attorneys say he already paid more than $10 million in child support, including money for college and graduate school.

He testified last week that he and Gold agreed that she would be responsible for raising their two children while he provided financial support.

On cross-examination, John Quinn, Donald Bren's lead trial attorney, asked David Bren about a summer he spent studying at Oxford University in England, and about traveling to Europe while growing up.

Quinn asked if David Bren felt deprived because he never went on a private jet or yacht, like his father. The 18-year-old said he did not and agreed that he had a happy and healthy childhood.

Donald Bren is 16th on the Forbes wealth list with an estimated net worth of $12 billion.

Monday, August 23, 2010

URS Pays $52 Million to Settle Claims Over 2007 Minnesota Bridge Collapse


URS Corp., an engineering and construction company, agreed to pay more than $52 million to settle claims that it failed to spot problems with a Minnesota bridge that collapsed and killed 13 people three years ago.

The company’s insurers will pay the settlement, which covers 145 people injured in the collapse of the Interstate 35W bridge outside Minneapolis along with the families of those killed, San Francisco-based URS officials said in a statement.

“I’m happy that the lawsuit has reached this conclusion, but there’s no doubt in my mind that any of us would trade this settlement for a bridge that was structurally safe in the first place,” Garrett Ebling, a survivor of the collapse, said at a news conference today.

The August 2007 collapse of the 40-year-old bridge was one of the worst U.S. bridge failures in the last 30 years, according to environmentalgraffiti.com, which tracks such disasters. The failure led to widespread concern over the safety of U.S. bridges.

URS officials, hired by the state of Minnesota to assess the safety of its bridges, didn’t know about a design flaw in the structure that left it vulnerable to collapse, the company said in the e-mailed statement. National Transportation Safety Board officials found in 2008 that the bridge’s steel plates weren’t hardy enough to handle traffic flow on the structure.

‘Protracted Litigation’

“We believe we have exposed exactly why the bridge fell,” said Chris Messerly, a Minneapolis-based lawyer for the bridge victims. He said victims are holding URS responsible for its role in the collapse through the settlement.

“We can’t directly change how corporate America conducts its business and treats people,” Messerly said in an interview today.

URS officials said the settlement wasn’t an “admission of liability or fault” on behalf of the Minnesota concrete contractor and engineering firm.

“URS believes it is in the best interest of the company and its shareholders to resolve this matter and avoid the cost and distraction of protracted litigation,” officials said in the release.

Victims sued URS in state court in Minneapolis in 2009. The case was set for trial in April. In March, URS agreed to pay $5 million to the state of Minnesota over its claims.

Messerly said Judge Deborah Hedlund gave final approval to the settlement Aug. 14 after the parties concluded negotiations.

The case is In re I-35W Bridge Collapse Litigation, 27-cv-09-16985, District Court of Hennepin County, Minnesota (Minneapolis).

Friday, August 20, 2010

BP Not Denying, Just Not Paying Nearly 40,000 Oil Spill Claims


Sheryl Lindsay's wedding planner business is on the brink, crumbling with each cancellation over concerns about oil. Brides-to-be are walking away from plans for beachside vows, leaving Lindsay waiting to see whether she'll be part of BP's promise to make whole everyone who's suffered from its spill.

BP said Monday it had received 145,000 claims from residents and business owners like Lindsay citing lost income because of the massive spill in the Gulf of Mexico, and had paid out $324 million without denying a single claim.

That sounds pretty good, until frustrated residents and officials point out that 39,000 claims are in limbo – some of them, including Lindsay's, have been there for months. Some that have been paid are only partial payments, and many of those people are still fighting for more money.

"Therein lies the problem," Mississippi Attorney General Jim Hood said recently. "They don't deny them. They just hold them open forever."

Hood speculated that BP PLC would rather wait for Kenneth Feinberg, the federally appointed administrator of the $20 billion compensation fund BP established at the behest of the White House, to take over the claims process this month. That way, if a claim is denied, "he's the bad guy" instead of BP, Hood said.

BP claims director Darryl Willis said the company isn't deliberately delaying. Rather, 26,000 pending claims are still being evaluated and thousands of others need more documentation, the company said.

"Our intent is to continue paying claims until this process is handed over to Ken Feinberg," Willis said. "There's no intent to slow this thing down."

However, BP does defer "questionable" claims to Feinberg, including "restaurants and tourist claims from areas that haven't been impacted by an oiled beach," company spokeswoman Pat Wright said.

"We believe there are some tough decisions out there that need to be made on a variety of these claims because many of these are claims are not squarely within the guidelines of the Oil Pollution Act," she added.

Google Must Face Age-Bias Lawsuit by Fired Employee

Bloomberg / Business Week

Google Inc., owner of the world’s most popular search engine, faces a trial in a California age- discrimination lawsuit filed by a creator of the first Internet firewall.

The California Supreme Court today affirmed a state appeals court decision in 2007 that had overturned a trial’s court dismissal of the complaint. The Supreme Court said the appellate court correctly refused to exclude so-called stray remarks made by supervisors and coworkers of the fired employee that were allegedly discriminatory.

Brian Reid, a former director of operations and engineering at Mountain View, California-based Google, claimed in his 2004 suit that he was fired after a supervisor said he was “too old to matter.” Reid created the first firewall, a security system for computer networks, and the Internet search engine Alta Vista, according to his employment lawyer.

Reid also claimed in the suit that Google Chief Executive Officer Eric Schmidt sent an e-mail directing a vice president to put together a “proposal for getting Reid out,” according to court documents. Reid, who was 54 when he sued, claimed other Google colleagues called him an “old man” and “old fuddy- duddy,” though he had received a favorable performance review showing he “consistently met expectations.”

“Brian Reid was not laid off based on his age,” Andrew Pederson, a spokesman for Google, said in an e-mail today. “The Supreme Court today simply upheld the lower court’s decision that the case should not be dismissed without a trial. We look forward to demonstrating in court the legitimate, nondiscriminatory reasons why Mr. Reid was let go.”

The case is Reid v. Google, S158965, California Supreme Court (San Francisco).

Thursday, August 19, 2010

Prosecutors: Illegal Immigrants Rescued from Houston Sex-Trafficking Operation


Two people were arrested and several women rescued from a life of prostitution Wednesday following an investigation by the Human Trafficking Resource Alliance, U.S. Attorney Jose Angel Moreno said Thursday.

Pedro Corporan Cedano, a 38-year-old citizen of the Dominican Republic, was arrested Wednesday during a traffic stop near his Deer Park home.

Cedano was charged with conspiracy to commit sex trafficking.

Prosecutors believe Cedano used several apartments in and around Houston and Pasadena to promote and provide commercial sex.

The alleged prostitutes were illegal immigrants, some of whom were paying off smuggling fees by selling sex, prosecutors said.

On Thursday, Carmen Angeles, 33, was charged with harboring illegal aliens. Angeles was arrested Wednesday at one of the apartments used by Cedano on Goodson Drive, investigators said.

According to the official criminal complaint, Angeles knowingly harbored two illegal immigrants at the apartment, where they engaged in prostitution.

Cedano was being held in federal custody pending an August 23 bond hearing.

Angeles is expected to make her initial court appearance on August 20.

Prosecutors said a total of nine women were found in the Houston apartments controlled by Cedano.

The women were placed in the custody of Immigrations and Customs Enforcement / Homeland Security Investigations and will likely be designated as material witnesses in the case.

Cedano could face up to 10 years in prison and a $250,000 fine if convicted of conspiracy to commit sex trafficking.

Angeles could face up to five years in prison and a $250,000 fine if convicted of harboring illegal aliens.

Michigan Court Sets New Standard in Injury Lawsuits

Bloomberg / Business Week

The Michigan Supreme Court has thrown out a 2004 decision and opened the door for more lawsuits by people seeking compensation after being injured in vehicle accidents.

The court, in a 4-3 decision, said conservative justices in the majority six years ago were too strict when they interpreted Michigan law about the impact of injuries on someone's ability to lead a normal life.

"This is huge," said lawyer Steven Gursten, whose specialty is auto cases. "The way Michigan law was changing, it was going to eliminate almost everyone who had been seriously injured in a car accident. That was not the intent of the Michigan Legislature."

An insurance trade group criticized the decision and predicted higher rates for motorists.

The court ruled in favor of a Genesee County man who suffered a serious ankle injury when he was run over by a truck at work. Under Michigan's no-fault law, someone hurt in a vehicle accident can recover lost wages and money for medical bills from their own insurer but suing a third party for pain and suffering is tougher.

Lower courts, citing a 2004 decision by the Supreme Court, had ruled against Rodney McCormick, noting he still had a job at the same pay and was living a normal life.

But Justice Michael Cavanagh, writing for the majority, said state law "merely requires that a person's general ability to lead his or her normal life has been affected, not destroyed."

Before being run over, McCormick worked 60 hours a week and regularly fished and golfed, Cavanagh said in an opinion released Sunday night.

"After the incident, at least some of plaintiff's capacity to live in this manner was affected," Cavanagh said. "For a month after the incident, plaintiff could not bear weight on his left ankle. He underwent two surgeries over a period of 10 months and multiple months of physical therapy."

Cavanagh was joined by justices Marilyn Kelly, Diane Hathaway and Elizabeth Weaver. In a dissent, conservative justices Stephen Markman, Robert Young Jr. and Maura Corrigan warned that Michigan's no-fault insurance system now could become financially stressed.

"The majority apparently holds ... that as long as a plaintiff's general ability to lead his normal life has been affected for even a single moment in time, the plaintiff has suffered a serious impairment of body function," Markman wrote.

The Insurance Institute of Michigan, which represents more than 90 companies, said motorists will see higher rates.

"The decision rewrites the standards ... and will provide for additional litigation and could seriously undermine the viability of our no-fault statute," director Pete Kuhnmuench said.

Gursten, however, said the ruling simply moves Michigan law back to where it was before the court's 2004 decision.

"I have trouble shedding tears for insurance companies," he said.

Tuesday, August 17, 2010

Laws on Sports Agents Rarely Enforced

Associated Press

When sports agent Jason Paul Wood met a pair of Miami baseball players in 2006 to talk about turning pro, his failure to notify the university and register with the state of Florida cost him a $2,500 fine.

Like 41 other states and the federal government, Florida has laws intended to keep amateur college athletes from losing their eligibility - and their schools from getting in trouble with the NCAA - because of dealings with an agent.

At a time when concern about improper contact between athletes and agents is spiking, however, cases such as Wood's are an exception, not the rule.

Legislatures have passed a flurry of laws in recent years designed to make states part of the effort to stop unscrupulous agents - along with the NCAA and, to a lesser extent, pro player unions. The idea is to ensure fair play and shield amateurs until they are done with school.

Yet an Associated Press review has found that more than half of the 42 states with sports agent laws have yet to revoke or suspend a single license, or invoke penalties of any sort. Likewise for the Federal Trade Commission, which in 2004 was given oversight authority by Congress.

"The actions of sports agents can do enormous damage to schools, to student-athletes and to the integrity of college athletics," said Rep. Bart Gordon, D-Tenn., who sponsored the federal law six years ago and now says it may be time to toughen sanctions against unethical agents. "Unfortunately, the sports agent involved has often walked away with no punishment."

The unions set rules for athlete agents, but those focus more on the relationship between agents and current pros rather than prospective clients still in school.

NCAA rules, meanwhile, do allow agents to meet with college athletes. However, they forbid those students from entering into contracts - including oral deals - with agents or accepting meals, gifts, transportation and other incentives as a hook to sign contracts later. The problem is that NCAA regulations apply to athletes and schools, not the agents themselves.

So when Heisman Trophy winner Reggie Bush was found to have received improper benefits at Southern California, the perennial football power was the one punished most - losing scholarships and getting banned from bowl games for two years, among other things.

Now the football programs at Florida and Alabama - the last two national champions - are under investigation for alleged improper contact. So is North Carolina, among others.

A decade ago, when at least 28 states had varied agent oversight laws, the NCAA lobbied state lawmakers to embrace standardized rules for sports agents.

The result was the Uniform Athletes Agent Act, which is on the books in 39 states. The UAAA is also under consideration in California, which along with Michigan and Ohio has its own laws to deal with agent oversight.

In addition to mandatory registration, the law requires agents to notify schools immediately when they sign college athletes. The students are given 14 days to change their mind and cancel contracts. And schools have the legal right to sue agents who violate the law - though that option is rarely exercised. Agents who fail to comply can be punished with civil or criminal penalties.

Here's the catch: The laws are rarely enforced.

The AP requested statistics on the number of registered agents, license revocations and suspensions and other penalties from each state. (Alaska, Colorado, Maine, Massachusetts, Montana, New Jersey, Vermont and Virginia lack such laws.)

Twenty-four states reported taking no disciplinary or criminal action against sports agents, and were unable to determine if state or local prosecutors had pursued such cases. Others described the laws as being enforced a few times, or rarely - an indication of what a low priority they are.

In Colorado, lawmakers in April rescinded a law passed in 2008 after just four agents registered to do business. Georgia has disbanded its Athlete Agent Regulatory Commission, transferring its duties to the secretary of state's office. Delaware plans to eliminate its agent oversight board, which has been inactive since 2002.

Pennsylvania has levied just four fines against sports agents since 2003, none greater than $1,000, and the head of the State Athletic Commission acknowledges that the law is not much of a deterrent.

"We try to do the best we can," said Greg Sirb, the commission's executive director. Agents caught in Pennsylvania might simply move to a neighboring state to sign the athlete, taking a chance that they won't get caught in a different jurisdiction.

In North Carolina, where the NCAA is probing possible improper contacts by agents with defensive tackle Marvin Austin and receiver Greg Little, the secretary of state's office was forced to tap state workers who usually investigate securities fraud to look into possible violation of its agent laws.

The 2003 state law "came with no funding, so we have no dedicated resources," spokeswoman Liz Proctor said.

The number of registered agents ranged from one in North Dakota to 400 in California, but state figures were so sketchy that a complete national picture could not be put together. The four top pro U.S. sports leagues - the NFL, Major League Baseball, NBA and NHL - have about 1,600 registered agents in all.

Under the laws, agents are typically required to register where they live, as well as where they do business. Many agents know they can ignore the registration requirements, said Kenneth Shropshire, a University of Pennsylvania sports law attorney and former agent.

"If you've got bank robbers and rapists, white-collar crime - how many agent issues should be raised to the top of some prosecutor's desk?" said Shropshire, director of the Wharton Sports Business Initiative at Penn's business school.

On the federal level, the Sports Agent Responsibility and Trust Act was approved in 2004 to serve as a "backstop" for states without their own laws, said Nebraska athletic director Tom Osborne, who coached the Cornhuskers to three national titles and was a lead sponsor of the measure while serving in Congress.

The law spells out civil penalties of up to $11,000 for violations, but an FTC spokesman said the agency has had "very, very few" complaints and taken no enforcement actions.

One of the few examples of a state enforcing the law with some consistency is Texas, which has taken disciplinary action against 31 agents in the past two years, levying a total of $17,250 in fines. That number will likely increase because several cases are pending.

In Alabama, a man who allegedly tried to solicit a Crimson Tide player hospitalized after a 2005 injury faces felony charges for failing to register with the state. So does the agent for whom the man reportedly worked as a "runner."

From the athletes' perspective, dealing with the crush of agents wanting to make a deal is "definitely an issue," said Atlanta Falcons quarterback Matt Ryan, a Boston College standout and the third pick in the 2008 NFL draft.

"Heading into my last year at BC, my dad helped me out a bunch in terms of staying in contact with them. The biggest thing that I didn't want in my last year was any kind of distractions. I had made that clear to agents in meeting with them before the season and let them know ... 'The only time I talk to you is after we finish our season.'"

Ryan believes it should be up to the individual player to handle the pressure of being a draft choice - he sees it as a sign of maturity - but others want a crackdown.

Last week, Alabama coach Nick Saban organized a conference call with Florida's Urban Meyer, Ohio State's Jim Tressel, NFL commissioner Roger Goodell, the NCAA and others to address the problem. The NCAA's Leadership Council also will address the issue in October.

"We're all trying to put our heads together to figure out what we can do to level the playing field so that everybody that's in the agent community - which some of them are very professional - have the same opportunity to recruit players and that the bootleggers out there are guys that get punished and penalized," Saban said.

Pittsburgh sports agent Ralph Cindrich sees his profession as a scapegoat.

He supports expanding agent oversight laws to others who have a stake in an athlete's success. "Include the coaches, include the boosters, include the financial runners, include the players," he said.

Others suggest the NCAA's rules need to be changed - that forbidding players to sign with agents while in school is an illegal restriction on their fundamental right to legal counsel.

"How is retaining an agent to look after a player's best interest in the negotiation process detrimental to amateurism?" said Rick Karcher, who directs the Center for Law and Sports at Florida Coastal School of Law. "And why should states prosecute somebody criminally for something that isn't harming an individual player?"

"The only reason it's a problem is because the NCAA says it is."

Insurance Regulators Battle Consumer Concerns Regarding Life Insurance Benefits

Insurance regulators at the state level, with concerns to improve the disclosure of payment options among insurance plans with death-benefits, issued an alert to consumers regarding the insurance industry standards of retaining funds rather than paying them outright in a lump sum.

“You may be able to earn a higher rate of interest on the life insurance proceeds if you select a different payout option,” the National Association of Insurance Commissioners said in accordance with the alert. “While the documents you receive might look like a checkbook, it might actually be drafts, which are similar to checks, but different in some ways.”

The consumer alert was revealed after a NAIC panel meeting Monday in Seattle which reviewed retained-asset accounts. Insurance regulators established the panel after Bloomberg Markets reported that insurance providers profit by retaining and investing roughly $28 billion owed to 1 million beneficiaries.

“Disclosure is paramount,” said co-chair of the panel, Thomas R. Sullivan. “That seems to be the central issue.”

These retained-asset accounts allow insurance companies to keep proceeds of life insurance policies in their general corporate accounts, earning income on investment, while providing the beneficiary with an account similar to checkbook which offers no insurance by the Federal Deposit Insurance Corp. The NAIC heard testimony from Peter Gallanis of the National Organization of Life & Health Insurance Guaranty Associations that the accounts of issue are covered solely by state insurance regulators. While beneficiaries are able to draw drafts on the account's funds, they do not always clear as easily as checks.

Within the consumer alert, the NAIC made suggestions to consumers to evaluate alternatives to keeping benefits in an interest-bearing account. The alert also emphasized consumers to inquire about what type of interest rate they will receive, what potential charges that may be administered, and what will guarantee funds if the provider fails. Some policyholders went as far as consulting with a bad faith insurance lawyer for additional insights.

Sheila Bair, FDIC Chairman, voiced “serious concerns” in an Aug. 5 letter to the NAIC that consumers may be under the impression that the accounts are insured by the FDIC. New York Attorney General Andrew Cuomo has initiated a fraud probe and subpoenaed insurance companies including MetLife Inc. and Prudential Financial Inc.

The emergence of retained-asset accounts necessitates enhanced disclosure about the products, said Peter Kochenburger, a University of Connecticut law professor and NAIC-appointed consumer advocate. “The last NAIC bulletin is 16 years old. It’s very general.” The ambiguity regarding the accounts has prompted investigation among many experts involved in the industry, ranging from the typical insurance lawyer to government officials.

According to Kentucky State Representative Robert Damron, president of the National Conference of Insurance Legislators, only six states have administered explicit consumer protections on retained-asset accounts.

Damron is promoting that states pass what he calls a beneficiary’s bill of rights, making insurance providers use only retained-asset accounts for consumers who ask for them. Insurers would also be required to disclose how interest rates and fees are factored, in addition to how funds are invested - an issue that is raising the eyebrows of many bad faith insurance lawyers.

“Allowing the life insurance companies to default to retained-asset accounts is just not acceptable,” said Damron after Monday's meeting. “How any consumer advocate, which is what an insurance commissioner is supposed to be, could allow a default to an RAA raises serious concerns in my mind about who is protecting who.”

MetLife and Newark representatives, among the two largest U.S. life insurance providers, expressed to the NAIC panel that they offer sufficient disclosure to consumers explaining retained-asset accounts and give policyholders the option of a lump-sum payment.

Disclosures about these types of accounts “have evolved over the years,” said Bernard Winograd, executive vice president and chief operating officer of Prudential’s U.S.-based businesses. “It’s a balancing act between legal requirements and what the consumer can understand.”

It's the difference between what is required in the policy and how aware the customer is about the benefits and the corresponding requirements, a disclosed insurance defense lawyer said after Monday's meeting.

Many insurance consumers select retained-asset accounts, which offer safety and time to grieve, he said. “Checks have a tendency to get lost” and obtaining a significant lump-sum payment can leave beneficiaries feeling “subject to predators,” he mentioned. “My only worry is we go back to a system where we force checks on people not prepared to accept them.”

Documents regarding MetLife’s "Total Control Account" are “thorough, clear and easy to understand,” battled Todd Katz, executive vice president of U.S. business at the New York-based insurer. The accounts make a payment of a minimum guaranteed interest rate at 3 percent, 1.5 percent or 0.5 percent, depending on when they were opened, he said. 

Monday, August 16, 2010

For Apple Suppliers, Pressure to Win

The Wall Street Journal
Indictment Alleging Employee Kickback Scheme Highlights the Value of Information in Race for Prestigious Contracts

Allegations of a kickback scheme orchestrated by an Apple Inc. employee underscore the pressures on companies that hope to serve as suppliers to the fast-growing Silicon Valley giant.

Paul Shin Devine, a global supply manager at Apple, was accused in a federal grand jury indictment with receiving more than $1 million in kickbacks from six Apple suppliers in Asia. Mr. Devine, who was arrested Friday, was charged with offenses that include wire fraud, money laundering and unlawful monetary transactions. The indictment also names Andrew Ang, an employee of one of Apple's suppliers, who is accused of wire fraud and conspiracy.

Apple also named Mr. Devine in a civil suit filed Friday in U.S. District Court in San Jose, Calif., that includes allegations of fraud and violations of racketeering laws. He is scheduled to make a court appearance on Monday.

"Apple is committed to the highest ethical standards in the way we do business," said an Apple spokesman, adding that it has "zero tolerance for dishonest behavior inside or outside of the company."

Mr. Devine, of Sunnyvale, Calif., couldn't be reached for comment. Arlette Lee, an agent for the Internal Revenue Service, confirmed that it conducted the investigation jointly with the FBI and Mr. Devine was being held in an undisclosed location by the U.S. Marshals Service.

Ms. Lee said Mr. Devine didn't yet have a defense attorney. She declined to comment on Mr. Ang's whereabouts. Mr. Ang, of Singapore, couldn't be reached for comment. The FBI and the U.S. Marshals Service didn't return calls seeking comment.

According to the indictment and the civil suit, Mr. Devine came up with an elaborate scheme in which he supplied companies such as Cresyn Co. in South Korea, Kaedar Electronics Co. in China and Jin Li Mould Manufacturing Pte. Ltd. in Singapore with confidential information that would let them negotiate favorable contracts with Apple. The companies provided goods such as mechanical parts, tooling and fixtures in connection with products that included Apple iPods and iPhones, according to the documents.

The allegations point to the high financial stakes for suppliers, which made regular payments to Mr. Devine in exchange for information that would help them in dealing with Apple—including Apple's sales volume forecasts, product specifications, competitors' target prices and bids, according to the indictment and Apple's complaint. In a correspondence with Jin Li Mould, for example, Mr. Devine recommended that it offer Apple a price of two U.S. cents for a part, in between the one cent that Apple desires and the four cents submitted by a competitor.

A spokesman for Cresyn, an earphone maker in South Korea, on Monday expressed regret about the situation but said that its contract with the Apple employee was "not illegal."

Jin Li and Cresyn couldn't be reached for comment. Calls to Kaedar Electronics' China office went unanswered Sunday. A spokesman for Pegatron Corp., the manufacturing subsidiary of Asustek Computer Inc. of Taiwan, said Pegatron acquired Kaedar in late 2008 or early 2009. The Pegatron spokesman, Charles Lin, said he wasn't aware of the indictment or lawsuit against Mr. Devine. The Wall Street Journal previously reported that Pegatron is working on an iPhone for a second mobile standard, CDMA, for Apple.

The indictment and the civil suit also suggest the effort Mr. Devine made to avoid detection at a company well known for its tight security. Mr. Devine corresponded with the suppliers through Hotmail and Gmail accounts that he created, even telling one contact that the "Apple IT team will randomly scan email for suspicious email communications for forecast, cost and new model information," according to the indictment.

Mr. Devine asked for payments in traveler's checks and opened as many as 14 bank accounts in the U.S. and overseas, some of which were in his wife's name and a corporation that he set up called CPK Engineering Inc., the indictment alleged. The document states he requested that payments be wired in amounts less than $10,000 to avoid detection and used code words such as "sample" instead of "payment" to further disguise the transactions. Mr. Devine shared part of the money with Mr. Ang, who was an employee of Jin Li, and helped broker deals with Jin Li as well as others, the document alleges.

Apple's lawsuit said Mr. Devine began working for Apple in July 2005 as a manager responsible for selecting and managing relationships with companies that supply Apple with parts and materials for iPods and iPod accessories. His profile on networking website LinkedIn said he graduated from the Sloan School of Management at the Massachusetts Institute of Technology in 2005 and worked at testing equipment maker Teradyne Inc. from 1998 to 2005.

Apple also stated, in its complaint, that the company began investigating Mr. Devine last April for a possible violation of its corporate policy and found a cache of suspicious e-mails from Hotmail and Gmail accounts in his company laptop that contained discussions with suppliers that included confidential corporate information and acknowledgments of payments received.

The Cupertino, Calif., company said these activities apparently took place from October 2006 until the present. The federal indictment said the alleged scheme took place no later than February 2007.

Trial Near of Mozilo; Politicians Draw Heat

The Wall Street Journal

Angelo Mozilo, former chief executive officer of Countrywide Financial Corp.
Federal investigations into Countrywide Financial Corp. are heading toward decisions that could determine the futures of former company executives as well as public officials who did business with the fallen mortgage giant.

A congressional investigation of Countrywide's controversial VIP mortgage program, which turned up 30 loans to senators or staffers, is finding a similar number of loans went to House members or employees, say people familiar with the matter.

At the same time, the Securities and Exchange Commission's civil-fraud case against three former top Countrywide executives, including longtime chief executive Angelo Mozilo, is scheduled for an October trial in federal court here. The SEC, which alleges the defendants hid increasing risks in Countrywide's loan portfolio by masking its exposure to risky subprime loans, is seeking financial penalties and injunctions.

A defense attorney for Mr. Mozilo said he didn't have any comment beyond the defendants' court filings in which they all deny any wrongdoing.

Countrywide is now part of Bank of America Corp., but rebranded as Bank of America Home Loans.

The SEC case is likely to affect a continuing criminal probe by the U.S. attorney's office here. An SEC victory would likely encourage prosecutors, who are calling witnesses before a grand jury, while a loss would have the opposite effect, said people familiar with the matter.

And "if the defendants are found culpable, the government gets momentum" in its broader search for wrongdoing out of the national financial meltdown, said Mark Biros, a former federal prosecutor, now an attorney in Washington. However, a loss would likely force the government to "re-evaluate" its broader investigative effort, he adds.

A U.S. attorney's office spokesman declined to comment.

While the financial crisis has sparked a number of federal investigations, no top executive, such as Mr. Mozilo, has been criminally charged.

One likely difficulty is finding proof that a given individual intended to defraud and wasn't simply "overwhelmed by the financial crisis," said Columbia University law professor John Coffee.

He said Countrywide "is one of the few companies that could show criminal prosecutions" if the government can prove executives hid growing problems in the loan portfolio, which ultimately damaged the company and led to its sale in 2008 to Bank of America.

In court filings in the Countrywide case, the SEC cites internal company emails where Mr. Mozilo describes some of Countrywide's mortgages as "toxic" and "the most dangerous product in existence."

Mr. Mozilo's attorneys accuse the SEC of taking "sound bites" that "plainly distorted" what their client wrote. They argue that Countrywide fully disclosed its business risks and are seeking to have the SEC charges dismissed before trial.

While the dispute might be settled before trial, it still could influence the criminal probe. Extensive depositions taken of Mr. Mozilo and others could be of great use to prosecutors, said Christopher Bebel, a former SEC attorney and federal prosecutor now in private practice in Houston. In the 2006 criminal trial of former Enron Corp. president Jeffrey Skilling, prosecutors used an alleged misleading statement from an SEC deposition he gave to attack his credibility. Mr. Skilling's fraud conviction is under court review.

A Countrywide trial presents "a gift to prosecutors," who can evaluate defense strategy and the impact of particular evidence and witnesses, said Robert Mintz, a former federal prosecutor who now is an attorney in Newark, N.J.

On the flip side, a trial gives defense attorneys a chance to question potential criminal-case witnesses and find weaknesses in their stories, said Jacob Frenkel, a former SEC attorney now in private practice in Potomac, Md. Plus, he added, losing the Countrywide case "would be a devastating blow" for the SEC, given the battering its reputation has taken because of the failure to detect such problems as Bernard Madoff's fraud.

Former SEC chairman Harvey Pitt has a less-dire view of a loss but said the case is "significant because it is a reflection of the SEC's commitment to go after people who have had involvement in the financial meltdown."

On the political front, the House Oversight and Government Reform committee investigation into Countrywide's VIP loan program could spur a new round of ethics probes. On Thursday, the Hill newspaper, citing an unnamed source, reported that the Senate Select Committee on Ethics is looking into the 30 VIP Senate loans after receiving a letter on the matter from Rep. Darrell Issa, the California Republican who is spearheading the House inquiry.

A Senate ethics committee spokesman declined to comment.

The Issa-led probe has also raised questions about an investigation by the Senate ethics panel, which last year cleared Sens. Christopher Dodd (D., Conn.) and Kent Conrad (D., N.D.) of any rule violations in the VIP loans they obtained.

In its public letter last year to Mr. Dodd, the committee said it interviewed former Countrywide employees, looked through thousands of pages of documents and examined the senator's dealings with Countrywide back to 1999. But the letter referred specifically to only two VIP loans from 2003 that were the subject of a complaint by a watchdog group. Records obtained by the House probe show that Sen. Dodd received as many as six VIP loans, including refinancings, dating back to 1999.

The Senate ethics committee spokesman declined to comment.

A spokesman for Mr. Dodd said that the ethics committee letter was "clear" that the investigation "examined all of Dodd's loans from Countrywide since he first became a customer in 1999" when it concluded that the senator hadn't sought or knowingly received any special favors.

U.S. Insurance Regulators Issue Consumer Alert on Death Benefits


FDIC Chairman Sheila Bair voiced “serious concerns” that consumers may mistakenly think the accounts are insured by the FDIC in an Aug. 5 letter to the NAIC. 
Photographer: Andrew Harrer/Bloomberg
State insurance regulators, under pressure to improve disclosure of death-benefit payment options, issued a consumer alert about the industry practice of retaining funds rather than paying them in a lump sum.

“You may be able to earn a higher rate of interest on the life insurance proceeds if you select a different payout option,” the National Association of Insurance Commissioners said in the alert. “While the documents you receive might look like a checkbook, it might actually be drafts, which are similar to checks, but different in some ways.”

The alert was issued after an NAIC panel met yesterday in Seattle to review retained-asset accounts. The regulators created the panel after Bloomberg Markets magazine reported in July that insurers profit by holding and investing $28 billion owed to 1 million beneficiaries.

“Disclosure is paramount,” said Thomas R. Sullivan, co- chair of the working group, at its first meeting yesterday. “That seems to be the central issue.”

Retained-asset accounts let insurers keep proceeds of a life insurance policy in their general corporate accounts, earning investment income, while providing the beneficiary with a checkbook-like account that’s not insured by the Federal Deposit Insurance Corp. The NAIC heard testimony from Peter Gallanis of the National Organization of Life & Health Insurance Guaranty Associations that the accounts are covered by state insurance backstops. While beneficiaries can draw drafts on the funds, they don’t always clear as easily as checks.

‘Serious Concerns’

In its alert, the NAIC suggested consumers consider options besides keeping benefits in an interest-bearing account at the insurer. It also urged consumers to ask what interest rate they will get, what fees may be charged and what will guarantee funds if the insurer fails.

Improving disclosure is a better way to protect consumers than passing new laws, said Sullivan, Connecticut’s insurance commissioner.

FDIC Chairman Sheila Bair voiced “serious concerns” that consumers may mistakenly think the accounts are insured by the FDIC in an Aug. 5 letter to the NAIC. New York Attorney General Andrew Cuomo has opened a fraud probe and subpoenaed insurers including MetLife Inc. and Prudential Financial Inc.

The growth of retained-asset accounts necessitates improved disclosure about the products, said Peter Kochenburger, a University of Connecticut law professor and NAIC-appointed consumer advocate who spoke before the working group. “The last NAIC bulletin is 16 years old. It’s very general.”

Bill of Rights

Only six states have issued clear consumer protections on retained-asset accounts, according to Kentucky State Representative Robert Damron, president of the National Conference of Insurance Legislators.

He is urging states to pass what he calls a beneficiary’s bill of rights requiring that insurers only use retained-asset accounts for consumers who request them. Firms would also be forced to disclose how interest rates are determined, how funds are invested and any service fees.

“Allowing the life insurance companies to default to retained-asset accounts is just not acceptable,” said Damron after yesterday’s meeting. “How any consumer advocate, which is what an insurance commissioner is supposed to be, could allow a default to an RAA raises serious concerns in my mind about who is protecting who.”

Representatives of MetLife and Newark, New Jersey-based Prudential, the two largest U.S. life insurers, told the NAIC panel they provide ample disclosure to consumers explaining retained-asset accounts and give policyholders and beneficiaries the choice of a lump-sum payment. About 60 percent of customers close out their accounts within a year, the officials said.

‘Balancing Act’

Disclosures about retained-asset accounts “have evolved over the years,” said Bernard Winograd, executive vice president and chief operating officer of Prudential’s U.S.-based businesses. “It’s a balancing act between legal requirements and what the consumer can understand.”

Many customers choose the accounts, which offer safety and time to grieve, he said. “Checks have a tendency to get lost” and receiving a large lump-sum payment can leave beneficiaries “subject to predators,” he said. “My only worry is we go back to a system where we force checks on people not prepared to accept them.”

MetLife’s disclosure documents for its so-called Total Control Account are “thorough, clear and easy to understand,” said Todd Katz, executive vice president of U.S. business at the New York-based insurer.

The accounts pay a minimum guaranteed interest rate of 3 percent, 1.5 percent or 0.5 percent, depending on when they were opened, he said. MetLife has 485,000 retained-asset accounts. “In today’s interest-rate environment, we believe this is an exceptional consumer value,” Katz said.

“To be sure, TCA accounts are also good for MetLife,” which aims to grow assets, he said. “Nothing here is secret. We do make a profit on TCA.”

Saturday, August 14, 2010

Oracle Sues Google for Patent Infringement

Associated Press

Oracle Corp. said Thursday it has filed a patent and copyright-infringement lawsuit against Google Inc.

Oracle said in a statement that Google's Android system for mobile phones infringes on its patented Java technology.

Google spokesman Andrew Pederson said the company can't comment because it has not yet reviewed the lawsuit.

Oracle, which makes database software and other technology, acquired the Java computer programming language and related technology when it bought Sun Microsystems. That deal that closed in January.

Java can be used as a platform for building applications for computers, websites and smart phones and other mobile devices.

In its complaint, filed with the U.S. District Court for the Northern District of California, Oracle said Google's Android operating system software consists of Java applications and other technology. As such, it infringes on one or more parts of seven different patents - something Google should know, Oracle argues, because it has hired former Sun Java engineers in recent years.

Oracle also said Google's Android also infringes on Oracle's copyrights in Java.

Oracle is seeking an injunction to stop Google from further building and distributing Android, plus higher monetary damages for willful and deliberate infringement.

Google says about 200,000 Android-powered phones are being sold each day.

HP Cooperating in International Bribe Probe

Associated Press

Hewlett-Packard Co. said Thursday it is cooperating with U.S. and German authorities investigating allegations that three company executives used bribes to win a contract to sell computer gear to the Russian prosecutors' office.

German prosecutors have been looking into whether the executives, plus at least six accomplices who did not work for the company, paid bribes totaling 8 million euros (about $10.3 million) to win a 35 million-euro contract to supply computers, software and hardware to the Russians. Prosecutors say at least two of the executives no longer work for HP.

The Wall Street Journal reported Thursday that the Justice Department has asked HP to hand over internal documents to German prosecutors after they complained that the company had refused to provide them with relevant records.

The Securities and Exchange Commission is also investigating possible violations of the foreign Corrupt Practices Act, which prohibits bribes of foreign officials. Russian officials, who raided HP's Moscow offices in April at the request of German prosecutors, have joined the investigation, too.

"HP is and has been fully cooperating with all authorities on this matter," the company said in a statement.

The Justice Department and SEC declined comment to The Associated Press.

The latest development came just days after HP CEO Mark Hurd abruptly resigned following an investigation into sexual-harassment claims. The company said it found that its sexual harassment policy wasn't violated, but it uncovered falsified expense reports connected to dinners and other meetings with the woman who made those claims, Jodie Fisher. Hurd has settled with Fisher for an undisclosed sum.

HP, based in Palo Alto, Calif., is the world's No. 1 personal computer maker.

The contract for the Russian deal was signed in 2000, and the deliveries continued until 2006 or 2007, German authorities have said.

The three executives were arrested in Germany and Switzerland in December and later freed on bail. The participants are suspected of offenses including breach of trust, tax evasion and money laundering, authorities said. Authorities say it's unclear who took the bribes, which flowed through a network of foreign firms and bank accounts.

The matter came to the attention of Dresden prosecutors when a tax office in Germany's Saxony state inspected a local company whose account was used in the kickback scheme, authorities said.

CA Judge Weighs former FBI Informant's Lawsuit

Associated Press

A former FBI informant who infiltrated a mosque and helped bring in a counterterrorism suspect suffered a blow in trying to sue his former handlers over his alleged mistreatment when the agency cut him loose.

A federal judge issued tentative rulings Thursday against Craig Monteilh, who for more than a year worked to spy on Orange County mosques and helped build a case against an Afghan-born man who prosecutors say has ties to Osama bin Laden.

U.S. District Court Judge James Selna will hear arguments from attorneys Friday on the FBI's motion to dismiss the lawsuit and issue a final ruling.

Selna indicated he would dismiss the lawsuit against the agency and against a supervisor who oversaw Monteilh's operation.

If Selna tosses Monteilh's lawsuit, it will be a major setback for the man who claimed he was hung out to dry by his FBI handlers at the end of a sensitive counterterrorism operation he said was dubbed "Operation Flex."

Monteilh, a 48-year-old former fitness instructor with a criminal past, provided information in the case against Ahmadullah Niazi, who was arrested in February 2009 on suspicion of lying about ties to terrorist groups on his application to become a U.S. citizen and other papers.

Monteilh claims FBI agents spent months instructing him to pretend to be a half-French, half-Syrian Muslim convert and secretly film and record dozens of worshippers at mosques, including the Islamic Center of Irvine.

In court papers, Monteilh said he worked for the FBI for 15 months in 2006 and 2007 and his level of involvement in the surveillance operation grew until he led prayers and made $11,200 a month for his spying.

But things turned sour when the Irvine Police Department accused him of scamming two women out of more than $157,000 by getting them to give him money to invest in human growth hormones and supplement sales.

Monteilh claimed he was in fact working on behalf of an FBI drug task force and was instructed to plead guilty to grand theft so he wouldn't blow his cover as an informant. The agency disputes that and denies having any part in the scam.

"The FBI absolutely was not involved in directing Mr. Monteilh to defraud anyone," spokeswoman Laura Eimiller said.

Monteilh eventually served eight months in prison in the case.

"It's all about justice for my family. They took me away from my children and my wife for eight long months," Monteilh said.

His attorney, Adam Krolikowski, said if the judge's ruling becomes final, he will appeal and also file an amended complaint against the FBI supervisor.

"The fact of the matter is that Mr. Monteilh is a man who was betrayed by the FBI and he was sent to prison for work that he performed for the FBI," he said.

Aside from suing the agency, Monteilh also has tried to get back at the FBI by working with the American Civil Liberties Union of Southern California as it crafts a lawsuit of its own.

In April, he signed a 28-page declaration detailing his informant work to help the group as it prepares for the lawsuit. That case has not been filed.

"The ACLU of Southern California is deeply concerned about the FBI's use of informants in religious institutions," the ACLU said in a statement. "Mr. Monteilh has given the ACLU information in the course of our investigations, as have dozens of other individuals throughout the region. The ACLU does not now and has never represented Mr. Monteilh in any litigation."

Monteilh has also met with Niazi's defense attorney, Krolikowski said.

Though the FBI has said little publicly about the case, it is scrambling behind the scenes to silence the ex-informant. In recent days, Associate General Counsel Henry R. Felix has asked Monteilh's lawyer to disclose any information he shares with civil rights lawyers representing his former targets and has warned Monteilh a nondisclosure agreement he signed remains in effect.

The unusual case underscores the risks the FBI takes when it relies on outsiders to help build cases in sensitive counterterrorism investigations.

It is not uncommon for informants to feel disillusioned at having worked for the government when investigations end, but it's rare for an informant to turn against the FBI, said Ken Wainstein, former general counsel for the FBI.

"Like any relationships, sometimes the handler-confidential informant relationship can go south," he said.

Monteilh is no stranger to legal woes. The one-time machine operator at a Wonderbread factory has a lengthy rap sheet dating to the 1980s, and a history of evictions and debts for everything from car payments to rent to credit cards.

His brushes with the law accelerated dramatically after a bitter divorce in 2000, when his ex-wife alleged in court papers he had threatened her life, tried to choke her and pulled a gun on her.

In court papers and his ACLU declaration, he says he was asked to work as an informant for local law enforcement in 2004, when he became friendly with some police officers in a local gym. By 2006, he was promoted to the FBI's counterterrorism operations.

Monteilh alleges he gathered phone numbers and contact information for hundreds of Muslim-Americans and recorded thousands of hours of conversation using a device on his key fob or cell phone during his stint with the FBI.

His said his handlers told him to work out with Muslims at gyms, asked him to get codes for security systems so they could enter mosques at night and encouraged him to ask mosque members about "jihad" and supporting terrorist operations abroad.

In June 2007, however, mosque members became suspicious of Monteilh and requested a restraining order, saying that he had spoken repeatedly about engaging in jihad.

A judge granted the order and roughly six months later, the Irvine police arrested him for the steroid case.

Monteilh was released from prison in 2008 and now lives with his second wife in Orange County.