Thursday, September 22, 2011

Judge Sets Schedule in Case Over Google’s Digital Library

Story first appeared in The New York Times.

Google’s plan to build a huge digital library remained stalled on Thursday when a federal judge set a proposed schedule for a lawsuit against the giant search company that could take the case to trial next year.

But Google and the publisher and author groups who are suing it all said they would continue to negotiate on an agreement.

“The bottom line is, we’re making good progress toward a settlement. We would hope to resolve the issues we have left.”

In March, Judge Denny Chin of the Federal District Court for the Southern District of New York rejected the original $125 million proposed settlement among Google, the Authors Guild and the Association of American Publishers, leaving the case in limbo. The case began in 2005 when publishers and authors filed lawsuits against Google over its plan to digitize millions of books.

Judge Chin had given the groups all summer to revise the settlement, twice granting extensions when lawyers for the groups asked for more time, citing the complexity of the issues.

The publisher plaintiffs hinted that they were closer to an agreement with Google than were the authors. Bruce P. Keller, a lawyer for the publishers, said that his clients had no objection to the proposed schedule.

“One of the reasons we have no objection to it is that we think we’ve made enough progress in our discussions with Google so that the schedule may not matter. If we adopt the dates that are being proposed, we hope that those dates will become moot.”

In his ruling in March, Judge Chin cited concerns over copyright, antitrust and other issues in Google’s plans to make millions of books available online, saying it would give Google a “de facto monopoly,” but he suggested that a revised settlement addressing the obstacles might pass legal muster. The incentive for authors and publishers to reach agreement would be to tap a new source of revenue from digitized books.

Negotiations between the Authors Guild and Google were damped by the announcement on Monday that three major authors’ groups, including the Authors Guild, had filed a lawsuit against a partnership of libraries and five universities, contending that their efforts to digitize books violated copyright. Nearly all of those scanned works were provided by Google.

Countrywide May Be Going Bankrupt

Story first appeared in Bloomberg Law.
Bank of America Corp. (BAC), the lender burdened by its Countrywide Financial Corp. takeover, would consider putting the unit into bankruptcy if litigation losses threaten to cripple the parent, said a Boston Bankruptcy Lawyer.
The option of seeking court protection exists because the Charlotte, North Carolina-based bank maintained a separate legal identity for the subprime lender after the 2008 acquisition, said the people, who declined to be identified because the plans are private. A filing isn’t imminent and executives recognize the danger that it could backfire by casting doubt on the financial strength of the largest U.S. bank, the people said.
The threat of a Countrywide bankruptcy is a nuclear option that Chief Executive Officer Brian T. Moynihan could use as leverage against plaintiffs seeking refunds on bad mortgages. Moynihan has booked at least $30 billion of costs for faulty home loans, most sold by Countrywide during the housing boom, and analysts estimate the total could double in coming years.
If the losses become so great, how can Bank of America at least not discuss internally the relative tradeoff of a Countrywide bankruptcy? And if you pull out the bazooka, you’d better be prepared to use it.
Countrywide Practices
Just before former CEO Kenneth D. Lewis bought Countrywide, it was the biggest mortgage lender in the U.S. with 17 percent of the market and $408 billion of loans originated in 2007, according to industry newsletter Inside Mortgage Finance. Regulators later found its growth was fueled by lax lending standards, with loans marred by false or missing data about borrowers and properties.
Bankruptcy for Countrywide has gained credence with some investors and analysts after Bank of America lost almost half its market value this year. The shares have been whipsawed as the caseload of lawsuits by mortgage bond investors expanded, along with doubts about whether the bank has enough reserves to handle claims.
A Countrywide bankruptcy could halt legal proceedings and consolidate litigation into one court that would split up the subsidiary’s remaining assets for creditors. In effect, this would trade one type of litigation for another. The decision would turn on whether the potential savings of a filing outweigh the risks involved in disavowing some of the firm’s obligations.
What Could Go Wrong
Pitfalls include the possibility that a bankruptcy filing would cast doubt on the entire company’s willingness to support its other subsidiaries and damage Bank of America’s standing in the credit markets or with rating firms, hurting its ability to borrow, according to a Houston Bankruptcy Lawyer.
Moynihan, 51, has been asked publicly about a potential Countrywide bankruptcy at least three times in the past year, most recently this week at a conference in New York. The bank’s mortgage division is his only unprofitable business, reporting a $25.3 billion pretax loss in the first half of this year.
Larry DiRita, a Bank of America spokesman, said he couldn’t comment on whether the company planned to file a Countrywide bankruptcy. The bank took great pains to preserve the separate identity of Countrywide.
Separate Accounting
Those steps include using separate accounting systems and profit-and-loss statements for Countrywide units, according to a report prepared for Bank of New York Mellon Corp. (BK), the trustee for a group of investors who agreed to an $8.5 billion settlement in June with Bank of America over faulty loans.
Bankruptcy makes absolute good sense if they can do that, said an Indianapolis Bankruptcy Lawyer. FHFA sued Bank of America and 16 other banks this month to recover losses on about $200 billion in mortgage-backed securities sold to Fannie Mae and Freddie Mae, the government- backed mortgage firms. Bank of America and its subsidiaries created more than a quarter of those bonds.
Given the size of these lawsuits, the potential liability could exceed the net worth of the subsidiary. They could say the claims far exceed the amount that we have and therefore we need a bankruptcy court to pick and choose between those creditors.
Assets Available
Countrywide has $11 billion in assets that could be depleted through demands to repurchase defective mortgages. After that, Bank of America may not have any obligation to pay claims from Countrywide’s creditors.
Typically, a corporation that acquires another firm’s assets isn’t liable for the seller’s debts, unless the transaction is considered a de facto merger or there was fraud in the takeover.
American International Group Inc. (AIG), the insurer that sued Bank of America last month to recoup more than $10 billion in losses on Countrywide mortgage bonds, argued that the bank is a legal successor to the unit. New York-based AIG cited a series of transactions by Bank of America in 2008 that were structured in such a way as to leave Countrywide unable to satisfy its massive contingent liabilities, according to a Paris Bankruptcy Lawyer.
Just in Case
Plaintiffs in the $8.5 billion settlement handled by BNY Mellon didn’t take any chances. Their agreement specified that Bank of America was responsible for making good on the payment because they were concerned that Countrywide might be thrown into bankruptcy, said Bob Madden, a Gibbs & Bruns LLP partner representing institutional investors that sued the bank.
The chances of a bankruptcy filing rise every time another suit gets put on the pile.
Bankruptcy’s Backlash
Bankruptcy would be a last-ditch option, and possibly a costly one, because counterparties might become hesitant to buy the parent company’s debt or open trading lines with its Merrill Lynch unit. Credit-rating firms could downgrade Bank of America subsidiaries, which benefit from the implicit support of their corporate parent. That would drive up the bank’s cost of borrowing.
Most counterparties think this would be a very difficult option for Bank of America and unlikely to be sanctioned by regulators. The whole reason they would pursue the nuclear option of a Countrywide bankruptcy would be to put this behind them, but all you would be doing is opening up a Pandora’s box.
Outstanding Debt
Countrywide has $6.53 billion of debt outstanding, including $2.81 billion of senior unsecured notes, $2.2 billion of preferred securities and $529 million of mortgage-backed bonds, Bloomberg data and Bank of America figures show. The unit’s $1 billion in 6.25 percent notes have plunged 9.2 cents since Aug. 1 to 97.1 cents on the dollar as of Sept. 13, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.
Management’s public stance on a potential Countrywide bankruptcy has evolved. In November, responding to a question from Mayo — who had written a report that month entitled “Is a Countrywide Bankruptcy Possible?” — Moynihan said he didn’t see any liability that would make us think differently about working through it in the way we’re working.
Since then, damage from Countrywide has steadily mounted as U.S.-owned Fannie Mae and Freddie Mac step up demands that the bank repurchase soured loans and new suits emerge, including from AIG and the FHFA. Further, New York Attorney General Eric Schneiderman is seeking to scuttle the $8.5 billion deal, which may result in greater mortgage costs, according to a Wilmington Bankruptcy Lawyer.
Last month, when Moynihan was asked during a conference call held by fund manager and bank shareholder Bruce Berkowitz if a Chapter 11 restructuring would be a viable solution for Countrywide, the CEO declined to say what he’d do.


Story First Appeared in Bloomberg Law - Legal News

Former Primary Global Research LLC executive James Fleishman, charged with participating in an insider-trading scheme, won’t testify in his own defense at a trial after prosecutors finished their case, said a Winston-Salem Security Lawyer.

Fleishman, of Santa Clara, California, is charged with two counts of conspiracy for his role in what prosecutors said was a scheme in which technology-company employees, working as consultants for the company passed secret tips to hedge fund managers.

Rakoff said Fleishman’s lawyers may submit some written evidence without calling witnesses to testify. After court, Ethan Balogh, Fleishman’s lawyer, said his client wouldn’t testify. If convicted, Fleishman faces as long as 25 years in prison claimed a Frankfurt Securities Lawyer.

The Mountain View, California-based firm, also known as PGR, matches employees of public companies with fund managers for a fee. Of the 15 people charged in the probe, 12 have pleaded guilty. Fleishman and Winifred Jiau, a former PGR consultant convicted in June, were the only ones who have gone to trial.


Also yesterday, former Taiwan Semiconductor Manufacturing Co. manager Manosha Karunatilaka was sentenced by Rakoff to 18 months in prison for his role in the scheme involving PGR. Some say this situation could have avoided if he taken anti bribery training.

Karunatilaka, 37, of Marlborough, Massachusetts, worked as an account manager for Taiwan Semiconductor. He pleaded guilty in May to accepting about $35,000 to pass material, nonpublic information about the company’s orders while also working as a consultant for PGR.

His lawyer, Brad Bailey, had asked Rakoff for a one-year sentence, with six months to be served in prison and six months of home confinement.

An analyst at an unidentified New York-based hedge fund, which used PGR’s services, spoke to Karunatilaka frequently from 2008 to 2010, prosecutors said in court papers. In May 2009, acting on a recommendation from Karunatilaka to bet that Taiwan Semiconductor shares would fall, the fund made a profit of about $1.7 million, the U.S. said.


At Fleishman’s trial yesterday, Balogh cross-examined Suk- Joo Hwang, a former Samsung Electronics Co. manager who said he worked as a consultant for PGR for seven years. Hwang said he sometimes passed confidential information to PGR clients. This is not a good procedure according to a Budapest securities lawyer.

Answering prosecutors’ questions on Sept. 14, Hwang said he gave Fleishman and a fund manager confidential information about Samsung’s shipment of liquid crystal display screens that it was supplying to Apple Inc. Hwang said he disclosed the information to Fleishman and the manager, who he identified as “Greg,” during lunch at a Mountain View restaurant in December 2009, four months before Apple released the iPad in the U.S.

Under questioning by Balogh, Hwang said that while he agreed to be truthful in his discussions with investigators, he didn’t initially tell them that he had continued to provide information about Samsung to a fund manager after he had stopped his consulting work with PGR.


Hwang said he initially told Federal Bureau of Investigation agents that he only spoke to analysts during calls for PGR. Later, he told investigators he knew at the time that he was speaking to fund managers on PGR calls. This may have been prevented if he had taken insider trading compliance training.

Hwang testified after Rakoff granted him immunity from prosecution for his testimony. Hwang, who met with prosecutors and FBI agents beginning in October and as recently as August, doesn’t have a cooperation agreement with the U.S. According to the immunity order, Hwang can be prosecuted if the U.S. decides he’s committed perjury while on the witness stand.

Thursday, September 15, 2011

Democratic Campaign Treasurer Arrested

Story first appeared in the Wall Street Journal.
Accusations that a campaign treasurer stole more than $1 million from Democratic candidates across California have jolted the party on the eve of the 2012 campaign season.
The reach of an alleged fraud scheme widened as more California Democrats, including Sen. Dianne Feinstein, said their war chests had been raided by a prominent campaign treasurer.
Kinde Durkee was arrested Sept. 2 and accused by federal authorities of stealing campaign funds and using the money to pay for an array of personal expenses, including mortgage payments, cosmetics and nursing-home care for her mother. Based in Burbank, Calif., the 58-year-old had long managed money for scores of Democratic campaigns.
According to the federal criminal complaint, Ms. Durkee "misappropriated money from her clients' bank accounts and filed false disclosure reports to hide the misappropriations." Ms. Durkee "admitted that she had been misappropriating her clients' money for years," according to court documents.
Her lawyer didn't immediately respond to requests for comment.
The complaint against Ms. Durkee focused solely on her alleged misappropriation of more than $600,000 from the campaign accounts of state Assemblyman Jose Solorio's campaign accounts. But prosecutors said the case is set to widen as evidence surfaces that more politicians were alleged victims and millions of dollars in campaign donations may be missing.
Ms. Durkee's most prominent alleged victim so far appears to be Sen. Dianne Feinstein, who has used her services for nearly 20 years. A spokesman for Sen. Feinstein said they believed money was missing from campaign funds but it was unclear how much.
It could take years of forensic accounting to sort out the funds. Money from state and federal campaigns that are subject to different rules have been commingled, according to the federal complaint. Campaigns have unwittingly been spending money from other campaigns and their donors, according to people familiar with the matter.
While some California political figures expressed shock at the allegations against Ms. Durkee, there are growing indications that there were potentially serious problems in her operation for years.
Stephen Kaufman, a campaign attorney who worked for clients of Ms. Durkee's said there definitely had been red flags that have gone off in the last few years. Mr. Kaufman said he was working with a number of clients to find out the status of the bank accounts that Ms. Durkee had controlled.
Ms. Durkee was cited for financial reporting misdeeds 11 times by the state agency that oversees campaign finances, starting in 2002. The fines totaled $190,000.
Compared to other campaign treasurers, the number of citations stood at an extreme level, said Ann Ravel, chairwoman of the Fair Political Practices Commission, the state oversight agency. Ms. Durkee was the subject of quite a few major violations.
One of the investigations found unusual fluctuations in the campaign accounts of a statewide regulatory board candidate. Investigators noticed similar irregularities in the accounts of other clients of Ms. Durkee, including one official for a federal office, prompting the state agency to contact the Federal Bureau of Investigation, Ms. Ravel said.
The impact on the Democratic Party in the state was unclear Tuesday, but party officials said any lost funds could hamper their efforts to run effective campaigns in a tough election season.
Garry South, a longtime political consultant for Democrats in California said this appears to be political fraud and theft on a scale he has never seen in 40 years in politics. He added that it looks like she might have removed millions of dollars from Democratic campaign coffers of 2012 and it might not be easy to replace.
Sukhee Kang, the mayor of Irvine, who is running for the U.S. House of Representatives next year, said iIt is really a broken trust. Mr. Kang believes that more than $45,000 is missing from his campaign funds. He said he checked one campaign bank account earlier this week and instead of finding an expected $22,000 there, it contained $718.
U.S. Rep. Susan Davis wrote in a letter to her supporters, saying more than $250,000 was stolen from her campaign, and that Ms. Durkee, her treasurer, had been arrested.
Eric Bauman, the chair of the Democratic Party of Los Angeles, said Ms. Durkee managed the group's funds for at least 12 years, and had full control of its four bank accounts. He said he believes the fund is missing more than $200,000—most of the cash the group should have on hand.
Campaign treasurers function as a candidate's banker and accountant—keeping track of all the incoming and outgoing funds and following federal guidelines for financial reporting. The treasurer typically has full control of candidates' political accounts.
Ms. Durkee was a trusted political operative within the Democratic Party in California, with roots in campaigns stretching back decades. She got her start in campaign finance in the 1970s on the George McGovern campaign, as a protégé of veteran campaign treasurer Jules Glazer. Ms. Durkee built up her client base through word of mouth. It helped that there are only a handful of campaign treasurers in the state, political insiders said.
People who met Ms. Durkee and visited her offices say she gave no outward sign of lavish spending. She was never dressed expensively, said a Democratic consultant who knew her for years.
Her offices in Burbank, Calif., were nondescript. During campaigns, visitors saw staffers processing donation checks on tables. Several of Ms. Durkee's family members worked at her firm, according to firm records and court testimony.
Wylie Aitken, a prominent trial lawyer and major Democratic donor in Orange County, said Ms. Durkee had been recommended to him as probably the premier person to look after you so you didn't break campaign rules.

Poor And Unemployed Targeted For Receiving Improper Payments Totaling Billions

Story first appeared in USA TODAY.
The Obama administration is targeting programs that help the poor and unemployed as it seeks to recover billions of dollars in improper payments.
The effort, part of a government-wide focus on wasteful spending led by Vice President Biden, will get a high-profile boost today when the entire Cabinet meets for the first time on that subject alone.
The latest target for government auditors is Medicaid, the federal-state health care program for the poor and people with disabilities. The Health and Human Services Department will announce an initiative today aimed at recovering $2.1 billion in improper payments over five years.
At the same time, the Labor Department will intensify its partnership with states to reduce improper payments of unemployment insurance. More than half the states have improper payment rates higher than 10%, led by Indiana and Louisiana at more than 40%, according to Labor Department data.
Medicare and Medicaid are considered high-risk programs by the Government Accountability Office because they are prone to high rates of fraud, waste, abuse and improper payments. The GAO estimates that $70 billion was lost through improper payments in 2010 — roughly 10% of their combined federal cost.
The Health and Human Services Department estimated that improper payments in Medicaid alone cost the government $22.5 billion last year.
Government recovery efforts have lagged far behind the problem. Inspector general reports show that $4 billion was recovered last year from improper payments in government health care programs, a figure which has risen steadily from $1 billion in 2007.
The effort to track improper government payments dates to 2002 under the Bush administration and was later expanded to include Medicare and, most recently, Medicaid. Last year's health care law called for about $6 billion in savings by cracking down on waste and fraud.
Past administrations have made similar efforts to reduce waste and audit programs for efficiency and effectiveness. Vice President Al Gore headed President Clinton's Reinventing Government effort, while President George W. Bush created a new method of assessing and rating government programs.
In carrying on the tradition, President Obama brought it under Biden's control and instructed all government agencies to look for wasteful spending, just as he has pushed them to eliminate unneeded regulations.
Outside experts say the effort is worthwhile — but they warn not to expect too much.
Veronique de Rugy, a senior research fellow at George Mason University's Mercatus Center, says past government efforts have proven largely ineffective. She says the federal government is so big at this point that you just can't do proper oversight, unless you're willing to hire an army and give them enforcement powers. She adds, they don't ever seem to get it under control.

Check In At A Luxury Divorce Hotel

Story first appeared in USA TODAY.
Often, hotels are where relationships start. But now, you can end them by checking into a luxury Divorce Hotel.
We're not talking about a 300-room hotel filled with angry couples.
Instead, the report says, Dutch entrepreneur Jim Halfens has created the "Divorce Hotel" for couples capable of ending their marriage without the need of a Northville Divorce Lawyer during a three-day mediation process.
The process takes place in the luxury hotel of their choice.
They might check into the Hotel Karel the Fifth in Utrecht, which oozes charm and - yes - even romance, the story says. Lawyers aren't invited.
Apparently, there are enough unhappy couples who have at least one thing in common - a love of high-end hotels - to keep interest high around the world.
Halfens tells that people email him for more information from as far away as Brazil, Taiwan and Italy.
Only one country where you can 'check in'
Due to differences in divorce laws, however, he says only Dutch couples can participate although he's working on launching Divorce Hotel in Germany through partners.
According to a Birmingham Divorce Lawyer, not everyone is suited to check into his Divorce Hotel.
Couples first go through an extensive interview process. Halfens looks for couples who can settle their differences quickly, the tells us. They then pick a four- or five-star hotel, check in and get down to business.
Over three days, a mediator talks the couple through the divorce process. Other specialists – such as notaries and psychologists – are available as well, the story says.
The process is said to be a faster alternative to the regular process, which could normally take six to nine months - or longer if the parting is especially bitter.
A Divorce Hotel stay costs $3,500 instead of thousands more for an official divorce, the piece says.

Tuesday, September 6, 2011


Story first appeared in USA TODAY.
Less than one week after Michael Jackson would have turned 53, there has been yet another twist into the ongoing saga following his premature death.
In an appeal late Friday, attorneys for Conrad Murray, the doctor accused of giving the late superstar a lethal drug overdose, challenged a judge's decision to not sequester jurors. The lawyers maintain that members of the jury could be negatively influenced by the publicity surrounding the case unless kept in isolation. They have also asked that jury selection be delayed until the matter is settled by an appeals court.
Murray has pleaded not guilty to charges of involuntary manslaughter, and could face up to four years in prison if a jury decides otherwise.
On a lighter note, Green Day frontman Billie Joe Armstrong announced on his Twitter account that he had been booted off a Southwest Airlines flight from Oakland to Burbank. The reason?
Armstrong tweeted that it was because his pants sagged too low.
In a statement, Southwest spokesman Brad Hawkins assured everyone that the singer/guitarist was put on another flight, and hadn't complained further when contacted by customer service.

Blackstone Exec Goes Undercover To Get Father-In-Law Arrested

Story first appeared in the Wall Street Journal.
A bizarre legal drama involving a leading private-equity financier at Blackstone Group has taken a new twist.
As part of a family feud worthy of "Law and Order," David Blitzer, a senior managing director at Blackstone, worked undercover in a sting operation that led to the arrest in 2008 of his father-in-law for attempted extortion. Now Mr. Blitzer has been named in a civil lawsuit by an 82-year-old attorney who represented his father-in-law.
The attorney, Stuart Jackson, says he was caught in the crossfire of a vicious squabble that spun out of control.
Mr. Jackson was arrested along with Mr. Blitzer's father-in-law, Stuart Ross. Mr. Ross pleaded guilty last year to a charge of attempting to extort money from his son-in-law through a harassment campaign. The 74-year-old entrepreneur, who is credited with bringing the Smurfs cartoon characters to the U.S., was sentenced to five years probation.
Mr. Jackson, for his part, ultimately was acquitted of criminal charges related to the affair. He filed a lawsuit last month in Manhattan federal court, claiming that the 41-year-old Mr. Blitzer, along with his wife, Allison, his lawyer and employees of the Manhattan district attorney's office, illegally conspired to prosecute him based on the actions of Mr. Ross.
The suit alleges false arrest, malicious prosecution and other violations of his civil rights, saying that a sting operation was orchestrated to set up Mr. Jackson.
A spokeswoman for Manhattan District Attorney Cyrus Vance Jr. declined to comment, as did representatives for Mr. and Ms. Blitzer and for Blackstone. Mr. Blitzer's lawyer, Roger Stavis, also declined to comment. Mr. Ross couldn't be reached.
Mr. Blitzer is well-known in private-equity circles. The Blackstone executive is co-chairman of the firm's private-equity group and is part of a group buying a stake in the Philadelphia 76ers basketball team. He joined Blackstone in 1991 after graduating from the University of Pennsylvania's Wharton School, and established the firm's investment presence in Europe a decade ago.
His family's longstanding conflict with his father-in-law took a turn for the worse in 2007.
In testimony at Mr. Jackson's trial, Mr. Blitzer said that he had given Mr. Ross tens of thousands of dollars over the years for different ventures, and the money was never returned. Mr. Blitzer's wife is estranged from her father and had cut off contact with him around 2002.
But Mr. Ross resurfaced in December 2007, asking again for money and to see his grandchildren. Despite his success with the Smurfs, Mr. Ross had lost most of his money through failed business deals, according to court records.
Mr. Blitzer gave him $65,000 and arranged a meeting for Mr. Ross at Blackstone. But when he balked at handing over another $50,000 in June 2008, his father-in-law unleashed a series of angry emails and phone messages, the executive testified.
Mr. Ross called and emailed Blackstone employees, from top executives to secretaries, attempting to discredit his son-in-law, the executive testified.
Mr. Jackson became involved in the dispute, his suit says, after Mr. Ross asked him to convey an offer to Mr. Blitzer to forgo contact with his grandchildren and other family members in exchange for money.
He began negotiating with Mr. Blitzer's lawyer, Mr. Stavis. In testimony, Mr. Stavis said Mr. Jackson told him that Mr. Ross expected to be paid $5.5 million. That's to stop the harassment of the family. (Mr. Stavis later admitted in testimony that the word "harassment" was used by him, and not Mr. Jackson.) At first, Mr. Jackson said Mr. Ross would cut off contact with Blackstone as a "bonus"; later, Mr. Jackson told him that would actually cost $5.5 million more, for a total of $11 million, Mr. Stavis said.
That offer was rejected, but the four men arranged a negotiating session at a New York social club that produced the key evidence in the case.
Mr. Stavis testified that he had contacted Manhattan prosecutors after hearing threatening voice mails left by Mr. Ross for Mr. Blitzer. The district attorney's office then outfitted Messrs. Blitzer and Stavis with tape recorders under their clothes for the negotiation at the Union League Club in Midtown Manhattan on Aug. 21, 2008.
With an investigator from the district attorney's office listening remotely, Mr. Blitzer agreed to pay Mr. Ross $250,000 to stop contacting his family and Blackstone. He gave Mr. Jackson $50,000 pending a final settlement, according to court records.
The next day, Messrs. Ross and Jackson were arrested.
In an interview, Mr. Jackson said he was unaware of Mr. Ross's threatening emails and calls, and thought he was engaged in a legitimate settlement of a family dispute when he was arrested and held in jail overnight without his diabetes medication.
His lawsuit also accuses Mr. Blitzer of harboring "ill will" against the lawyer because of his work for Mr. Ross on a failed real-estate deal for which the son-in-law had supplied $120,000.
Stephen Gillers, a law professor at New York University, said Mr. Jackson's lawsuit faces difficult odds because law-enforcement officials usually have immunity from liability in civil suits. Private parties such as Messrs. Blitzer and Stavis don't have immunity, but Mr. Jackson still would have to prove they had effectively become agents of the government and violated his rights.
Mr. Jackson's attorney, Amy Marion, said her client is seeking to recover $200,000 he spent to defend himself, as well as money for unspecified damages for harm to his reputation.
Mr. Jackson, a lawyer since 1957 and mostly involved in civil matters, said the experience had convinced him the criminal justice system is "broken."

IRS loses $3.9 million owed from Enron CEO

Story first appeared in Bloomberg.

Kenneth Lay, the deceased chief executive officer of Enron Corp., defeated the Internal Revenue Service in the agency’s bid to collect $3.9 million from his estate and his wife, the U.S. Tax Court ruled.
The case decided yesterday involved transactions among Lay, his wife, Linda, and Enron that were executed on Sept. 21, 2001. The Lays sold $10 million in annuities to Enron as part of an agreement for him to retake the CEO position, under the stipulation that the annuities would be returned to Lay if he worked a 4.25-year term. The company didn’t survive that long, and it filed for bankruptcy protection in December 2001.
The IRS contested the Lays’ contention that the annuities were sold to Enron for no gain, according to the Tax Court decision by Judge Joseph Goeke. In 2009, the IRS filed a notice of tax deficiency for $3.9 million, arguing that the Lays should have reported the $10 million as income in 2001. Instead, they reported that they sold the annuities to Enron at their cost basis, generating no taxable income.
Goeke wrote in the decision that the agency’s position was incorrect, and he ruled for Linda Lay and for Kenneth Lay’s estate. The transactions, he wrote, were legitimate, and neither of the Lays nor the estate received any distributions or death benefit from the annuity.
He said the annuities transaction is well documented, and all actions of the parties to the transaction reflect that Enron purchased the annuity contracts for $10 million, and the Lays properly reported the transaction on their 2001 tax return as a sale of the annuity contracts.
Tax Dispute
Charles Egerton, the attorney who represented the estate and Linda Lay in the tax case, said in a telephone interview today that the dispute over the annuity lingered after other issues regarding the Lays’ taxes were resolved. He described his client as delighted.
Lay, who died in 2006 at age 64, was convicted in May 2006 by a federal jury in Houston. He and the company’s former CEO, Jeffrey Skilling, were found guilty of deceiving shareholders about Enron’s financial condition by hiding debt and losses in a series of off balance-sheet entities.
More than 5,000 jobs and $1 billion in employee retirement funds were wiped out when the world’s largest energy trading company plunged into bankruptcy, following revelations of widespread accounting fraud.
Conviction Thrown Out
Lay’s convictions were later thrown out because he didn’t have a chance to appeal the cases before he died.
Enron’s creditors, the government, Lay’s estate and Linda Lay have been involved in a variety of lawsuits since the company’s demise.
The U.S government continues to pursue a $12.6 million civil forfeiture case against Linda Lay, which was initiated three months after her husband’s death. The Justice Department sued to recover $10.1 million from a family investment partnership, as well as $22,680 in cash and at least $2.5 million from the couple’s penthouse condominium in Houston.
Linda Lay has been trying to sell the 12,827-square-foot, Italian Renaissance-inspired condo unit since 2009. The property is now priced at $7.99 million, according to a Houston real estate-listings website, a significant increase from the $4.75 million valuation it carried on local tax rolls in 2007, the year after Ken Lay died.
Alisa Fanelli, a Justice Department spokeswoman, didn’t immediately respond to a request for the status of the government’s forfeiture case against Linda Lay.
‘Criminal Proceeds’
The government claims Lay derived more than $95 million in criminal proceeds from trading Enron stock, manipulating his Enron line of credit and receiving an incentive bonus as the company was spiraling into insolvency, according to court filings in the forfeiture case.
An FBI agent who investigated Lay claimed Enron’s founder paid off the remainder of his Houston mortgage with million- dollar payments of criminal proceeds less than a week after Enron’s bankruptcy.

New Reporting For Counterfeit Goods

Story first appeared in Bloomberg News.
The State of Mississippi, through the Office of the Attorney General, has set up a website that is part of a campaign against counterfeit goods.
The website for the Mississippi Intellectual Property Crime Center -- -- was established with the assistance of a grant from the U.s. Department of Justice. Aim of the site is to inform the public about IP crimes and their effects on the world.
The site has a section on fakes, with photos of counterfeit goods. It also provides citizens with a place to which they can give anonymous tips about sale of possible counterfeit items.
According to the Mississippi Intellectual Property Crime Center, the sale of counterfeit goods can be linked to drug trafficking, organized crime, terrorist activity, gang violence, child labor and life-threatening health issues.
Thailand, Cambodia Both Claim Dance Gesture as Cultural Icon
Both Thailand and Cambodia are laying claim to a hand gesture used in traditional dance and shadow places as an intangible culture heritage item, the Bangkok Post reported.
The gesture, known as the “jeeb” and created by touching the thumb with the index finger and splaying the other three fingers, has been registered by Cambodia with the United Nations Educational Scientific and Cultural Organization, according to the Bangkok Post.
Because it hasn’t ratified the Convention for Safeguarding Intangible Cultural Heritage allowing it to submit cultural heritage items to UNESCO for listing as cultural treasures, Thailand has, so far, only begun compiling a list, according to the Bangkok Post.
Thailand’s Culture Minister Sukumol Khunploem told the Bangkok Post that Cambodia hasn’t stolen the jeeb to claim it exclusively because it is normal for countries in the same region to share similar cultural traits.

Metallurgist Charged With Industrial Espionage For Getting Married

Story first appeared in Bloomberg News.
A former employee of the London-based mining company Oxus Gold Plc has been sentenced to 12 years in prison for allegedly committing industrial espionage, the Voice of America reported.
Said Ashurov, chief metallurgist at a joint venture between Oxus Gold and Uzbekistan authorities, was convicted by a military court, following his arrest in March when he was trying to cross the border into Tajikistan, according to Voice of America. A Leeds Intellectual Property Lawyer reviewed the case.
A lawyer representing Oxus Gold said the charges against Ashurov are fabricated, and the metallurgist, who has health issues, could die in prison without proper health care, Voice of American reported.
Oxus Gold ended the operation of its joint venture in March following what the BBC said were months of tensions with Uzbekistan’s authorities.
Court Says Company Can’t Fire Employee Over Marriage, and a Athens Intellectual Property Lawyer agrees.
An employment tribunal in Germany’s state of Schleswig- Holsten has told a German company that its firing of an engineer for marrying a Chinese woman wasn’t justified by the company’s fear of resulting industrial espionage, the BBC reported.
The unnamed company, a supplier for the German military, suspended the engineer for security reasons three months after his December 2009 wedding, and fired him three months after that, according to the BBC.
The court said the employer violated the employee’s right to marry the person of his choice, and the alleged security risk posed by the marriage wasn’t supported by facts, the BBC reported.
Court reports don’t identify the engineer or his company, according to the BBC.

Sports Event Streaming Questioned

Story first appeared in Bloomberg News.

Gannett Co., owner of television stations and 82 newspapers, lost its copyright claims over streaming-video presentation of Wisconsin high school sports programs. A Nashville Intellectual Property Lawyer commented that he had not experienced a case quite like this one.
The McLean, Virginia-based newspaper chain, was appealing a ruling from a trial court in Wisconsin that found the Wisconsin Interscholastic Athletic Association’s exclusive license agreements with a video production company didn’t violate Gannett’s First Amendment rights.
The dispute arose when some Gannett newspapers decided to stream four tournament games sponsored by the Wisconsin Interscholastic Athletic Association. The association then asked the federal court to declare it had the right to grant exclusive licenses. Gannet had argued unsuccessfully that WIAA can’t enter into exclusive contract with a private company to broadcast entire events online, or, to raise revenue.
The appeals court said in its August 24 opinion that the implications of Gannett’s arguments were staggering, and that if the media company was correct, then no state actor may ever earn revenue from something that the press might want to broadcast in its entirety.
If Gannett’s arguments were carried to their logical extreme, the appeals court said the patent licensing agreements executed by the University of Wisconsin through the Wisconsin Alumni Research Foundation -- and the $1.07 billion such licenses have brought the university since 21928 could be at risk. A Mexico Intellectual Property Lawyer agrees there is risk.
Gannett’s claim here would cast a shadow over the commercial licensees that WARF sells but implying that the First Amendment required it to dedicate its inventions to the public, the court said in its opinion. Likewise, the ability of high school students to record CDs and sell them to finance a school music program would also be at risk. These examples could be multiplied almost endlessly, the court said.
The court said that reporting on the event and streaming it aren’t the same thing. Everyone understands there is a difference between a description of an event like the Super Bowl, Women’s World Cup or the College World Series and the right both to videotape that entertainment and then to publish it as one sees fit, according to the appeals court’s opinion.
As far as Gannett’s copyright claim is concerned, the appeals court said that the WIAA itself is functioning as the creator and disseminator of content, not the newspapers.
The court the lower court’s holding that the WIAA has the right to grant exclusive licenses. This was also the opinion of a Shanghai Intellectual Property Lawyer.
The lower court case is Wisconsin Interscholastic Athletic Association v. Wisconsin Newspaper Association Inc., 3:09-cv-00155-WMC, U.S. District Court, Western District of Wisconsin (Madison). The appeal is Wisconsin Interscholastic Athletic Association v. Gannett, 10-2627, U.S. Court of Appeals for the Seventh Circuit.

Teva Patent Lawsuit Moves Forward

Story first appeared in Bloomberg News.

Mylan Inc.’s motion to dismiss a patent lawsuit by Teva Pharmaceutical Industries Ltd. over the multiple-sclerosis drug Copaxone was dismissed by a federal judge.
U.S. District Judge Barbara Jones dismissed Mylan’s claim that Teva’s patent for the drug was invalid, according to a filing yesterday in federal court. A trial on the patent infringement case in Manhattan is set to begin Sept. 7. A Salt Lake City Intellectual Property Lawyer agrees with the dismissal.
Teva, which licensed patents from Yeda Research and Development Co. for Copaxone, sued Novartis AG’s Sandoz in 2008 and Mylan in 2009 after they separately tried to win approvals from the U.S. Food and Drug Administration to market generic versions of the drug before its patents expired in 2014.
Jones consolidated the cases. An earlier motion by Sandoz to dismiss the patent claim as invalid was also rejected. The Sandoz case is Teva Phamaceutical Industries Ltd. v. Sandoz Inc., 08-7611, U.S. District Court, Southern District of New York (Manhattan). The Mylan case is Teva Pharmaceuticals Industries Ltd. v. Mylan Inc., 09-8824, U.S. District Court, Southern District of New York (Manhattan).


A part of Apple Inc.’s legal team representing the Cupertino, California-based company in a trademark dispute with Samsung Electronics Ltd. has withdrawn from the case, according to a court filing.
Samsung asked the court in a July 11 court filing to discharge Bridges & Mavrakakis LLP, of Palo Alto, California, from the case because of the firm’s previous representation of Samsung. The firm filed papers with the court Aug. 25 saying it would withdraw from the representation of Apple in the dispute.
The Suwon, South Korea-based company said lawyers from Bridges & Mavrakakis represented Samsung in a different infringement case involving one of the patents at issue in the Apple dispute. Bridges & Mavrakakis lawyers have worked almost 9,000 hours on Samsung patent litigation, according to the court filing. A Pittsburgh Intellectual Property Lawyer commented that the hours will continue to rise as the case progresses.
In the past, Samsung said, lawyers from the firm received confidential information from Samsung that is substantially related to this action. As a result, an irreconcilable conflict of interest required Bridges & Mavrakakis to be disqualified from representing Apple in this case, Samsung said.
Samsung said it had, to no avail, met with the firm on multiple occasions to attempt to resolve the conflict issue. The Korean company had argued that it was concerned about whether Bridges & Mavrakakis had confidential information, not whether they would use it.
According to the case docket, Apple continues to be represented by lawyers from San Francisco-based Morrison & Foerster LLP. A Boston Intellectual Property Lawyer believes that they are the best firm for the case.
The case is Apple Inc. v. Samsung Electronics Co., 11-cv-1846, U.S. District Court, Northern District of California (San Jose).

Intellectual Property: Samsung vs. Apple

Story first appeared in Bloomberg.
Samsung Electronics Co. agreed to push back the introduction of its newest tablet computer in Australia until the end of next month, the second delay in a month in its dispute with Apple Inc. in the country.
Samsung will defer the launch of the Galaxy 10.1 tablet computer pending a hearin scheduled the week of Sept. 26. on Apple’s request for an injunction, the Suwon, South Korea-based electronics maker said in a statement. David Catterns, an attorney representing Samsung, said his client is prepared to wait until the end of September. This was also the information received by a Washington DC Intellectual Property Lawyer.
The decision comes four weeks after Samsung first agreed to hold off on the Australian debut of the product. The two companies, the world’s two biggest makers of tablet computers, are also locked in legal disputes in markets including the U.S., Germany and South Korea according to a Frankfort Intellectual Property Lawyer.
Samsung will continue to push for the release of the product in Australia to ensure that consumers have a wider selection of innovative products to choose from.
Samsung agreed at an Aug. 2 hearing to hold off on sales of the 10.1 tablet after Apple claimed the device infringed 10 of its patents, including the look and feel of the iPad.
Samsung said the claim was based on a U.S. model and the Australian version was different. The company last week provided Apple’s legal team with three samples of the 10.1 version intended to be sold in Australia, Steven Burley, an attorney representing Apple, told Federal Court Justice Annabelle Bennett yesterday.
Burley said the Australian model, which has reduced functionality, still violates at least two of Apple’s patents. Samsung’s Catterns said the Australian model has different features” and doesn’t have reduced functionality.
The lawyers agreed to two days of hearings on Apple’s request for an injunction barring the sale of the 10.1 tablet in Australia until the resolution of the dispute, which may take months. The hearings are scheduled for Sept. 26 and 29. A San Francisco Intellectual Property Lawyer said this is normal procedure.
The agreement to halt advertising and the sale of the 10.1 tablet doesn’t affect any other Samsung tablet or smartphone available in Australia, or other countries, the company said following the Aug. 2 hearing.
A German judge said on Aug. 25 that Apple’s intellectual rights are probably strong enough to ban the sales of the 10.1 tablet in that country.
In the U.S., Samsung is arguing that the design for the iPad can be traced back to the Stanley Kubrick 1969 film “2001: A Space Odyssey.”
The case is Apple Inc. v. Samsung Electronics Co. NSD1243/2011. Federal Court of Australia (Sydney).


Story first appeared in USA TODAY.
A hedge fund worker who made more than $11 million through illegal trades was sentenced Wednesday to 5½ years in prison by a judge who complained that Wall Street wasn't hearing the message that insider trading is a crime that ruins careers and leads to time behind bars.
U.S. District Judge Richard Sullivan said as he sentenced Craig Drimal for his role in what prosecutors described as the biggest hedge fund insider trading case in history, that there has to be a message sent to hedge fund managers, traders and lawyers that this is not going to be tolerated.
Drimal was among more than two dozen hedge fund workers and corrupt employees of public companies convicted in a scheme prosecutors say reaped more than $50 million in profits and resulted in the convictions of more than two dozen people, including one-time billionaire Raj Rajaratnam, who awaits sentencing. Drimal pleaded guilty in April.
Drimal said he was deeply sorry for the pain that he caused, and he understands that he committed a crime and deserves to pay a price.
Drimal, who is in his mid-50s, sometimes shared office space at Rajaratnam's Manhattan-based Galleon Group of hedge funds, though he was not an employee. Drimal, the first securities trader to be wiretapped by federal authorities in the probe, was caught in a phase of the investigation that found several securities traders relying on tips from two corrupt lawyers at a Manhattan law firm who had information about pending mergers and acquisitions.
The judge said he was disappointed at the cavalier attitude displayed by participants in the securities fraud, including an arrogance that caused some of them to view insider trading as just another tool to gain an edge.
The judge said he thought that he was confident he wasn't going to be caught. He rejected requests by Drimal's lawyer for leniency because of his charitable works and his devotion to his family and friends.
The judge noted that Drimal played a key role in bribing lawyers to accept tens of thousands of dollars to supply tips that would reap millions of dollars for him and others.
During the sentencing hearing, the judge noted that Drimal spent $17,000 monthly and owned a 3,500-square-foot home while declaring no taxable income for several years, a fact his lawyer blamed on trading losses balancing out his gains.