Attorneys General in 40 States Said to Join on Foreclosures

Bloomberg

 

 

Attorneys general in about 40 states may announce by next week a joint investigation into potentially faulty foreclosures at the largest banks and mortgage firms, according to a person with direct knowledge of the matter.

State attorneys general led by Iowa’s Tom Miller are in talks that may lead to the announcement of a coordinated probe as soon as Oct. 12, said the person, who asked not to be named because an agreement wasn’t completed. The number of states may change because several are deciding whether to join, the person said. New Mexico Attorney General Gary King said yesterday in a statement that his office will join a multi-state effort.

Lawyers representing the banks expect a widening investigation, according to Patrick McManemin, a partner at Patton Boggs LLP, a Washington-based law firm that represents banks, loan servicers and financial institutions. Bank of America Corp., the biggest U.S. lender, yesterday extended a freeze on foreclosures to all 50 states.

“We are aware of or involved in a large number of investigations that lead us to believe there are in the neighborhood of 40 state attorneys general who have initiated investigations or expressed an interest,” McManemin said in a telephone interview.

Justice Department

Officials in at least seven states have already announced probes into claims that employees at home lenders and loan servicers signed court documents without ensuring the information was accurate. On Oct. 7, Miller said in a statement that he was working with state officials, banking regulators and the U.S. Justice Department to launch a coordinated review. Attorneys general in Ohio and Connecticut have said some of the practices may amount to fraud.

The Senate Banking Committee plans to hold a hearing Nov. 16 to investigate mortgage servicing and foreclosure practices, according to its website.

“American families should not have to worry about losing their homes to sloppy bureaucratic mismanagement or fraud,” the panel’s chairman, Connecticut Democrat Christopher Dodd, said in a statement. “Regulators at the federal, state and local levels have a responsibility to uphold the law and protect consumers from unfair foreclosure.”

Frozen Foreclosures

Bank of America, JPMorgan Chase & Co. and Ally Financial Inc. already froze foreclosures in 23 states where courts supervise home seizures, amid allegations that employees used unverified or false data to speed the process. Litton Loan Servicing LP, a mortgage-servicing business owned by Goldman Sachs Group Inc., said yesterday it’s halting some foreclosures to review how they’re handled.

Senate Majority Leader Harry Reid, a Democrat from Nevada, called on other banks and mortgage firms to follow Bank of America’s lead and “review their practices to ensure that they are not unfairly targeting homeowners in Nevada and across the nation,” according to a statement yesterday.

“There are reasons for these procedures and those are to make sure the banks own the homes they are foreclosing on,” Robert Lawless, a professor at the University of Illinois College of Law in Champaign, said in a telephone interview. “At the same time I don’t think it is going to be a tidal wave of relief for homeowners. My bet is that there will be a delay.”

Vickee Adams, a spokeswoman for San Francisco-based Wells Fargo & Co., and Mark Rodgers, a spokesman for New York-based Citigroup Inc., said the companies were still processing foreclosures. Thomas Kelly, a spokesman for New York-based JPMorgan, and Gina Proia, spokeswoman for Detroit-based Ally, declined to comment.

Homes Taken

Lenders took possession of a record 95,364 homes in August and issued foreclosure filings to 338,836 homeowners, or one of every 381 U.S. households, according to RealtyTrac Inc., an Irvine, California-based data vendor.

“If you have a national moratorium on foreclosures, that’s a problem,” Paul Miller, an analyst for FBR Capital Markets Corp. in Arlington, Virginia, said in a phone interview. “The longer you drag out foreclosures the longer it takes to get through” the housing slump, he said.

Judge Orders U.S. Military to Stop ‘Don’t Ask, Don’t Tell’

NY Times

 

A federal judge on Tuesday ordered the United States military to stop enforcing the “don’t ask, don’t tell” law that prohibits openly gay and bisexual soldiers from serving.

Judge Virginia A. Phillips of Federal District Court wrote that the 17-year-old policy “infringes the fundamental rights of United States service members and prospective service members” and violates their rights of due process and freedom of speech. She “permanently enjoins” enforcement of the law, she ruled, and ordered the military “immediately to suspend and discontinue” any investigation or proceedings to dismiss members of the services.

While Tuesday’s decision is likely to be appealed by the government, Judge Phillips's injunction represents a significant new milestone for gay rights in the United States.

Two other recent decisions have overturned restrictions on gay rights at the state and federal level, but Tuesday’s ruling could have a more sweeping impact, as it would apply to all United States service members anywhere in the world.

The case is Log Cabin Republicans v. United States of America. Christian Berle, the acting executive director of the Log Cabin Republicans, applauded the judge’s action, saying it would make the armed forces stronger.

“Lifting the ban on open service will allow our armed forces to recruit the best and brightest, and will not have their hands tied because of an individual’s sexual orientation.”

Alex Nicholson, the named plaintiff in the lawsuit, said that with the breadth of the decision, “We sort of won the lottery.”

The law has long been a point of contention. President Obama has asked Congress to repeal don’t ask, don’t tell, but the Department of Justice defended the law under rules requiring the department to defend laws passed by Congress under most circumstances.

Judge Phillips, who was appointed by President Bill Clinton, declared the law unconstitutional in an opinion issued on Sept. 9. She then sought recommendations from the parties as to what kind of legal relief should follow.

The Log Cabin Republicans, the gay organization that brought the suit, recommended a nationwide injunction. The Department of Justice recommended narrower action.

Arguing that “the United States is not a typical defendant, and a court must exercise caution before entering an order that would limit the ability of the government to enforce a law duly enacted by Congress” the administrated noted that that the law had been found constitutional in other courts. It asked that the judge’s injunction apply only to members of Log Cabin Republicans and not to the military over all.

In February, Robert M. Gates, the Secretary of Defense, and Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, asked Congress to repeal the law. The House voted in May to end don’t ask don’t tell, but the Senate last month voted not to take up the bill allowing repeal. Advocates for repeal have pushed for that vote to be reconsidered during the lame duck session of Congress following the midterm election.

Jim Manley, a spokesman for Senate Majority Leader Harry Reid, said: “Senator Reid is encouraged by the decision, and still hopes to be able to take the bill to the floor after the elections in November.”

Tony Perkins, the president of the Family Research Council and a proponent of the don’t ask, don’t tell law, criticized the ruling, accusing Judge Phillips of “playing politics with our national defense.”

In a statement, Mr. Perkins, a former Marine, said, “Once again, an activist federal judge is using the military to advance a liberal social agenda,” and noted that there is still “strong opposition of military leaders” to changing the law, and that the Senate’s decision to put off a vote on repeal was due in part to an ongoing study on the “the potential impact on readiness and morale of allowing homosexuals to serve.”

He predicted that the decision would have a political ripple effect in the upcoming elections. “Americans are upset and want to change Congress and the face of government because of activist judges and arrogant politicians who will not listen to the convictions of most Americans and, as importantly, the Constitution’s limits on what the courts and Congress can and cannot do.”

The government has 60 days to file an appeal. Tracy Schmaler, a Justice spokeswoman, said “we’re reviewing it,” and that there would be no other immediate comment.

The government is expected, however, to appeal the injunction and seek to keep it from taking effect pending appeal. That is still a risky strategy, said Richard Socarides, an adviser to President Clinton on gay issues. “There will be an increasingly high price to pay politically for enforcing a law which 70 percent of the American people oppose and a core democratic constituency abhors.”

The don’t ask, don’t tell case is one of three recent decisions in the federal courts in which federal judges have pushed back against laws that restrict gay rights. Another judge in California struck down California’s ban on same-sex marriages in August. And in July, a federal judge in Massachusetts ruled that a law prohibiting the federal government from recognizing same-sex marriages was unconstitutional, opening the way for federal benefits in such unions.

While President Obama has been critical of the Defense of Marriage Act the Justice Department has defended it in the federal court challenge. On Tuesday, the department filed an appeal in the Defense of Marriage Act, and issued a statement that might well be echoed in coming weeks in the military case.

“As a policy matter, the President has made clear that he believes DOMA is discriminatory and should be repealed, said Ms. Schmaler, the department spokeswoman. “The Justice Department is defending the statute, as it traditionally does when acts of Congress are challenged.”

Activists for gay rights said they are cheered by the overall sense of the three recent rulings. Chad Griffin, the board president of the American Foundation for Equal Rights, which sponsored the litigation against California’s same-sex ban, said “with the momentum of these three court decisions, I think it really is the beginning of the end of state-sanctioned discrimination in this country,” he said.

Former Gitmo Detainee Sues Over "Kafkaesque Nightmare"

The Miami Herald

 

In a first for a former Guantánamo captive freed by a federal judge, a Syrian man now living in Europe is suing the U.S. government for damages from what he calls a ``Kafkaesque nightmare.''

The 44-page lawsuit by Abdul Razak al Janko, 32, described a decade-long odyssey of detention -- first in Taliban-era Afghanistan, where he was tortured as an alleged pro-American Israeli spy, and later in U.S. military prisons that ignored or misdiagnosed his history as a torture victim.

In addition, Janko alleges that U.S. soldiers urinated on him on his May 2002 arrival at Guantánamo, where he was subsequently subjected to solitary confinement and sleep deprivation. and beaten by a rapid-reaction force. He said he attempted to commit suicide 17 times in despair.

President Barack Obama's administration had no comment.

``We're reviewing the suit and will respond in court,'' said Dean Boyd, spokesman for the Justice Department's National Security Division.

Federal courts rebuffed an earlier bid by former Guantánamo captives to sue the Bush administration for compensation, a case called Rasul v. Rumsfeld. That case was brought by four men who were released years ago through a diplomatic deal between the United States and Britain's Tony Blair government.

Janko, however, is armed with a June 22, 2009 victory in his habeas corpus petition. It is one of so far just 38 wins since the U.S. Supreme Court ruled in June 2008 that the Constitution covers a Guantánamo captive's right to file false imprisonment petitions in federal courts.

Judge Richard J. Leon, a President George W. Bush appointee, wrote in his 13-page decision that the Syrian's detention as a war prisoner ``defies common sense'' in part because he had been held and tortured by the Taliban or al Qaeda in the 18 months prior to his capture by U.S. troops in Afghanistan.

Janko was released four months later and, according to the lawsuit, seeks damages to cover his medical expenses from physical and psychological damage in U.S. custody as well as punitive damages.

It says he ``still has scars and other evidence of this physical torture and ill-treatment such as loss of bodily functions and inability to sleep.''

It was filed by Venice, Calif., attorney Paul L. Hoffman, who seeks jury trial in the same Washington D.C. courthouse where Leon ordered Janko set free.

The lawsuit doesn't specify where Janko went but says he was released on Oct. 7, 2009.

At the Center for Constitutional Rights in New York, attorney Shayana Kadidal says Janko is the first man who was released through a Guantánamo habeas petition to file a civil case. The rights organization has championed Guantánamo litigation for years and tracks the habeas petitions still being decided among the 174 captives now at the prison camps in southeast Cuba.

Veteran Guantánamo defense lawyer David Remes, who has nothing to do with either the Rasul or Janko case, says the Syrian's lawsuit may have a better chance than the British attempt. In December 2009, the U.S. Supreme Court declined to hear the case brought by the so-called Tipton Three and a fourth British citizen. All four had been freed in a diplomatic deal, not by court order.

``The strongest case is going to be one where a court ruled a person wasn't lawfully held in the first place,'' he said.

Remes, who has defended 17 Yemenis at Guantánamo through the years, and won some releases, says one need look no further than Canada to find a precedent for an unjustly detained war-on-terror captive receiving compensation.

Canada paid Canadian Maher Arar a $10.5 million settlement for Ottawa's role in his 2002 rendition by the United States to Syria, where Arar was tortured and held for 10 months. A Canadian inquiry found that the Royal Canadian Mounted Police had passed along erroneous information about Arar that set the rendition into motion.

The United States, however, has not acknowledged mistreatment of detainees at Guantánamo beyond what it says were scattered episodes of guards and interrogators misunderstanding the boundaries of behavior.

Such suits, said Remes, ``may be the only way to hold the responsible officials accountable for their crimes in public office.

``Obama's not going to prosecute them. Congress isn't going to have a Truth Commission. So we're back to the inefficient mechanism of individual damage actions.''

Janko's suit names Secretary of Defense Robert Gates, and his predecessor, Donald Rumsfeld; two of their deputies; Joint Chiefs of Staff Chairman Adm. Mike Mullen and his two predecessors, four Southern Command chiefs, five prison camps commanders and senior guards and intelligence officials.

Actor Larry Hagman Wins $11.6M Arbitration Against Citigroup

The Wall Street Journal

 

 

An arbitration panel ruled in favor of actor Larry Hagman in a securities case against a unit of Citigroup Inc., which was ordered to pay $1.1 million to the former star of the TV show Dallas and another $10 million to charities of his choosing.

Hagman, along with various trusts and IRA accounts titled in his name, filed a claim in May 2009 against Citigroup Global Markets alleging breach of fiduciary duty, civil fraud, misrepresentation and other charges. The case was related to unspecified securities in accounts held with Citigroup and with the purchase of a life insurance policy, according to the ruling.

As occurs in most securities arbitration awards, the Financial Industry Regulatory Authority panel did not spell out details of the case or of the reasoning behind its decision. However, the $10 million awarded in punitive damages, which Citigroup Global Markets must pay to charities that Hagman chooses, suggests a conclusion of serious wrongdoing.

Finra's manual for arbitrators, which was cited by the three-person panel, allows punitive damages if a firm engages in "serious misconduct that meets the standard for such an award." A 1995 U.S. Supreme Court case ratified Finra arbitrators' authority to order punitive damages.

Hagman requested $1.3 million in compensatory damages, plus punitive damages, lost-opportunity costs and other relief, according to the ruling. The $11.6 million award includes $1.1 million in compensatory damages, and Citigroup must also pay $440,000 in legal fees and $20,000 in arbitration costs.

Punitive damages are ordered in a very small number of such cases, said William Jacobson, director of the Securities Law Clinic at Cornell Law School. He was unaware of another case in which a panel required the payment of punitive damages to a charity.

"Having them paid for some public purposes is an interesting concept. The panel just could have made the amount payable to the claimant," he said.

"We are disappointed and disagree with the panel's finding," a Citigroup spokesman said in a statement. The company is reviewing its options, he said.

Hagman is best known for playing J.R. Ewing in the 1980s hit television series Dallas, and Major Anthony Nelson in I Dream of Jeannie, the 1960s television comedy.

In its ruling, the panel also declined to expunge a reference to the case in a public disclosure document for Hagman's adviser, Lisa A. Detanna, who works in a Beverly Hills, Calif.-based office of Morgan Stanley Smith Barney. Smith Barney -- Citigroup's retail brokerage -- and Morgan Stanley merged their brokerage operations in 2009.

The disclosure, which mentions the docket number of Hagman's case but not his name, refers to an allegation of mismanagement by "failing to protect...prinicipal and investing in unsuitable securities from 2005 until 2009." The case involved both listed and over-the-counter stocks, according to the disclosure.

A second arbitration case related to Detanna is pending, alleging $2.5 million in damages, according to the disclosure report. The report doesn't include the claimant's name, but mentions allegations of making unsuitable investments and failing to take steps to reallocate investments to protect against losses.

Detanna didn't return a phone call requesting comment. A Citigroup spokesman declined to comment on the disclosures.

Brokerage firms usually request to expunge information about arbitration claims from brokers' public disclosure records, according to securities lawyers, and arbitration panels only approve the request in extreme cases, such as where there was a fundamental misunderstanding about the facts.

"Expungement is often requested and rarely granted," said George Brunelle, a securities lawyer for Brunelle & Hadjikow, P.C. in New York who represents brokers.

Arbitration rulings involving celebrity claimants are rare, say lawyers. Many such cases settle before the proceedings end.

Philip Aidikoff, a Los Angeles-based lawyer who represented Hagman in the case, declined to comment.

Age Bias at Work: Should You Sue?

SmartMoney

 

 

A 20-something calls you "old man." Or, your boss only asks the under-30 set for input when the meeting turns to Twitter. Or maybe you've been passed over for a promotion in favor of a younger worker, or let go — you suspect — because of your age.

With a tight job market and more workers postponing retirement, aging in the workplace has only gotten harder. Beyond the stress of shrinking staffs and the threat of layoffs, older employees increasingly report feeling marginalized, simply because of their age. Now, a record number are taking their complaints to authorities: Age discrimination claims have increased 61% over the past decade, according to the Equal Employment Opportunity Commission (EEOC).

For workers who feel persecuted, bringing a lawsuit has the appeal of righteous vindication — and it can feel like the only option. But legal action is rarely as satisfying as it seems. While the legal system does protect workers from discrimination based on their age, the burden of proof is extremely high. "Most cases do not have a smoking gun," says Laurie McCann, a senior attorney with AARP Foundation Litigation, adding that few cases even get past the beginning stages. Even if they do, justice is rarely swift. The courts are backlogged, says Randall Leff, a partner at Ervin, Cohen & Jessup. "These cases can take years."

On top of that, it's often expensive. The EEOC takes only a handful of cases to court, but most of the time, it simply offers what's called a Notice of Right to Sue, which means you're welcome to hire your own lawyer. Most plantiffs' lawyers will take these cases on a contingency fee (usually about 40% of any money rewarded to you), which means in the best case scenario, you win the case and owe your lawyer hundreds of thousands of dollars, says Ron Chapman, an employment lawyer with Ogletree, Deakins, Nash, Smoak & Stewart. "That's a big chunk of money, and it should cause prospective plaintiffs to consider whether going through a lawsuit is worth it," Chapman says.

But discrimination is against the law. If you've been harmed and you can prove it, it can be worthwhile to sue. To show they've been treated unfavorably in hiring, promotion, termination, or another area of employment, because of their age, potential plaintiffs need tangible evidence, including dates, times, people involved, offending comments or actions, notice of termination, witnesses, statistics on the company's hiring, promotion or firing patterns, and more. And as if that wasn't tough enough, you have to show that age was the key factor in your boss' decision — not just one factor. Considering that numerous motivations usually go into employment decisions, this is particularly difficult. "It's not necessarily what happened, it's what you can prove," warns Leff.

Cases with high chances of success have certain things in common, though. They usually involve long-term employees who have had success at the company, experts say, and where broader statistics can demonstrate a discriminatory impact. Long-time employees can show a history of solid performance, which carries a lot of weight with a jury. Even if you didn't save all those performance reviews or don't have the stats that show your work, but you know the company has them, your attorney can ask for them in the discovery phase of your case.

Still considering a lawsuit? Here are four things to do before you call a lawyer.

Get a Reality Check

Before you make a complaint, "bounce your case off a mentor or a seasoned professional you trust," says certified career coach Hallie Crawford. Talk through the evidence you have for the claim, how rampant or blatant the discrimination is, and what effects it is having on you. Together, lay out the facts and determine if you've got something solid to present.

Talk to Your Boss

If you're still employed, take the case to your supervisor first. This is a conversation, not a confrontation, so ask for a private meeting and start informally, say, with a statement about how you appreciate your job, which confirms your commitment to the employer. Then clearly state the facts, McCann says. If the conversation gets tense — and it might — consider asking whether there are other reasons for what you're experiencing. This can help diffuse hostility and make it feel like a team effort to solve the problem, says Crawford.

Go to Human Resources

If the talk with the boss doesn't take care of the issue, or if the boss is the problem, you'll need to talk to HR. "They want to prevent lawsuits," says Chapman, so raising your concerns may quash the issue. If verbal meetings don't help, put your complaint in writing.

File a Claim

If you've gone through these steps and the discrimination persists, or if you were fired due to your age, you may want to file an age discrimination claim. You can file claims with the EEOC either by mail or in person, and "it's easy to do," says Leff. Often, the EEOC will help you settle the case or recommend mediation proceedings between you and your employer.

Just remember that you don't have long to file age discrimination claims — 180 days from when the discriminatory act took place, unless your state also has age discrimination in employment laws — most do — in which case this timeline can be extended to 300 days. And keep in mind, it can take an average of six months for the EEOC to investigate and decide if there's a legal violation.

Some States Charge Poor for Public Defenders

USA Today

States increasingly are imposing fees on poor criminal defendants who use public defenders even when they can't pay, causing some to go without attorneys, according to two reviews of the nation's largest state criminal justice systems.

A report out Monday by New York University School of Law's Brennan Center for Justice found that 13 of the 15 states with the largest prison populations imposed some charge, including application fees, for access to counsel.

"In practice, these fees often discourage individuals from exercising their constitutional right to an attorney, leading to wrongful convictions, over-incarceration and significant burdens on the operation of courts," the Brennan report concludes.

In Michigan, the report says, the National Legal Aid and Defender Association found the "threat" of having to pay the full cost of assigned counsel caused misdemeanor defendants to waive their right to attorneys 95% of the time.

Three states studied — Florida, North Carolina and Virginia — have no provisions for the courts to waive some of the fees if defendants can't pay. In Virginia, defendants may be charged up to $1,235 per count for some felonies, the report says.

A separate report of five state justice systems out Monday by the ACLU produced similar findings.

Both studies say the fees are a little-known source of revenue in the criminal justice system that are steadily rising.

"People are emerging from the criminal justice process with significant debts that they cannot hope to repay," says Rebekah Diller, a co-author of the Brennan Center report. "As a result, these fees are creating new paths back to prison for those unable to pay."

Vinita Gupta, the ACLU's deputy legal director, says: "We are creating a two-tiered system of justice in which the poorest among us are punished more harshly than those with means."

But Jim Reams, president of the National District Attorneys Association, says it "seems only fair" that defendants be required to pay.

"Since the vast majority of criminal defendants do not get sentenced to jail, but receive some type of probation instead, their job status and economics can and should change relatively quickly allowing repayment," he says.

David J. Johnson, executive director of Virginia's Indigent Defense Commission, says he has not seen defendants forego representation because of costs.

"I can't imagine that happening in a serious case," he says.

Missouri public defender Justin Carver says the fees sometimes surprise clients who have not closely reviewed court documents outlining conditions of the legal representation.

"We get a lot of calls around tax time," says Carver, referring to clients whose state tax refunds have been "intercepted" to pay outstanding legal bills.

In one case, Carver says, the fees even surprised a judge. Carver says the judge had just offered a defendant the services of a "free" lawyer when he was told that the service wasn't exactly free.

"He was floored," he says.

Novartis Fined $422.5M in Marketing, Kickback Case

Associated Press

 

 

Novartis Pharmaceuticals Corp. will pay $422.5 million in penalties for marketing an epilepsy medicine for unapproved uses and for paying kickbacks to doctors to prescribe it and five other drugs, federal officials announced Thursday.

The company agreed to plead guilty to distribution of a misbranded drug, a misdemeanor, and pay a criminal fine and forfeiture totaling $185 million in the case involving Trileptal, U.S. Attorney Zane Memeger said at news conference in Philadelphia.

"Every day in this country, patients rely on sound advice from their doctors," Memeger said. "Off-label marketing ... can undermine the doctor-patient relationship."

Novartis will also pay $237.5 million to resolve civil liabilities over the kickbacks and the off-label marketing of Trileptal, an anti-epileptic medicine, according to a settlement agreement.

The drug maker illegally marketed Trileptal as a treatment for bipolar disorder and nerve pain, sending its sales force to the offices of neurologists, psychiatrists and pain specialists, Memeger said.

While doctors are permitted to prescribe medications for off-label uses based on their medical experience, pharmaceutical companies are not allowed to market or promote drugs for uses not approved by the Food and Drug Administration, Memeger said.

"That legal obligation takes priority over generating profits," he said.

Federal prosecutors do not allege any patients were harmed by the off-label marketing.

"NPC is pleased to have this matter behind us, and will continue to work with the government and other organizations to improve health care for all Americans," the company said in a statement. "We are committed to high standards of ethical business conduct and regulatory compliance in the sale and marketing of our products."

The criminal information filed Thursday in Philadelphia alleges that Novartis sought FDA approval in 1995 to sell Trileptal as a treatment for mania - a component of bipolar disorder - but that it was not effective in clinical trials.

After beginning sales of Trileptal as an anti-epileptic drug in January 2000, the company was disappointed by poor sales and sought new ways to promote it. Novartis trained and rewarded sales reps for off-label marketing, the information said.

Prosecutors allege Novartis marketed the drug off-label from July 2000 through at least June 2004.

Recent sales figures for Trileptal are not reported because it is no longer a top 20 product, according to the company.

The government also alleges Novartis paid kickbacks to induce doctors to prescribe Trileptal as well as Diovan, Exforge, Tekturna, Zelnorm and Sandostatin.

The announcement Thursday resolves four whistle-blower lawsuits filed by former Novartis employees who reported the off-label marketing. They will share $25.6 million of the penalty money.

Novartis became aware of the government's investigation five years ago and had set aside $397 million by the end of 2009 in anticipation of a resolution, according to a quarterly financial report the company filed Jan. 26.

The drug maker, which cooperated with the probe, has entered into a corporate integrity agreement with the government that will subject the company to strict monitoring.

Novartis Pharmaceuticals, based in East Hanover, N.J., is a subsidiary of Swiss company Novartis AG, the world's third-biggest drug maker by revenue.

Merck to Appeal $4.6M Verdict in MA Fraud Case

Associated Press

 

 

Drugmaker Merck & Co. plans to appeal a federal court verdict that a former subsidiary caused the commonwealth of Massachusetts to overpay pharmacists for a widely used asthma medication, the company said Thursday.

After a three-week trial, a jury in Boston found Merck liable for about $4.6 million in compensatory damages. The judge hearing the case, U.S. District Judge Patti Saris, is to decide later on potential penalties, which Merck said could be substantial.

The three generic albuterol products involved in the case, which began in 2003, were manufactured and sold by Warrick Pharmaceuticals, a subsidiary of Schering-Plough Corp. Merck, based in Whitehouse Station, bought Schering-Plough in November 2009. Warrick closed the year before.

"The company intends to vigorously pursue a reversal of the verdict in the trial court and on appeal, if necessary," Bruce N. Kuhlik, Merck's general counsel, said in a statement.

Kuhlik said evidence presented at the trial showed Warrick was not responsible for the state's choices about how much it paid Massachusetts pharmacists for the drug. Merck said evidence showed Massachusetts never required Warrick to provide information on the price at which it was selling albuterol and that the prices Warrick reported to other government entities were accurate.

Drug companies are generally required to give government health programs such as Medicaid the same prices or discounts on medication that they give to other large customers.

Albuterol is a medicine that opens up airways for patients with asthma, bronchitis and chronic obstructive pulmonary disease. Usually, albuterol is supplied through inhalers or nebulizers, devices that blow medicine particles down the throat and into the lungs.

M&A Snaps Back as BHP, Intel Drive Busiest Quarter in Two Years‏

Bloomberg

Dealmaking staged a comeback in the third quarter, with a jump in multibillion-dollar takeovers putting this year on pace to surpass 2009.

The quarter was the busiest in two years, with $562.6 billion of announced transactions, according to data compiled by Bloomberg. BHP Billiton Ltd. made an unsolicited $40 billion offer for Potash Corp. of Saskatchewan Inc., Sanofi-Aventis SA began its pursuit of Genzyme Corp. for at least $18.5 billion, and Intel Corp. announced its largest acquisition, the $7.7 billion takeover of security-software maker McAfee Inc.

“M&A activity in the third quarter was strong, even better than expected,” said Jeffrey Kaplan, global head of mergers and acquisitions at Bank of America Corp., which is advising Potash Corp. on its takeover defense. “I see real potential for a broad-based recovery with a lot of larger corporate deals.”

With almost $3 trillion of cash in their coffers, companies drove a 59 percent increase in takeovers from a year ago, Bloomberg data show. Record-low borrowing costs encouraged dealmaking as the Standard & Poor’s 500 Index headed for its best September since 1939. The number of transactions valued at more than $3 billion doubled in the quarter, the data show.

The jump in deals in the third quarter, typically the slowest three-month period of the year, brings total announced takeovers to $1.48 trillion in the first nine months of 2010, compared with $1.76 trillion in all of 2009. This quarter accounted for about 38 percent of the volume so far this year.

‘Flush With Cash’

“We are at the start of an up-cycle,” said Henrik Aslaksen, Deutsche Bank AG’s global head of M&A in London. “Companies are flush with cash and have decided that it might be a good time to pick up quality assets they may have been eyeing for a while.”

Oracle Corp. Chief Executive Officer Larry Ellison said on Sept. 23 the company is seeking to buy chipmakers and extend its push into computer hardware. Procter & Gamble Co. CEO Bob McDonald said earlier this month his company is on the lookout for brands with international appeal.

The 1,000 biggest companies by market value worldwide have amassed about $2.87 trillion in cash and equivalents based on their latest filings, according to data compiled by Bloomberg. The figure excludes financial-services firms. Nestle SA, Europe’s largest company by market value, got $28.1 billion from an asset sale last month, sparking investor speculation it may step up takeovers.

Record-Low Rates

“Major corporations have the ability to implement deals and long-term strategies now, given their large cash buildup and the availability of low-cost financing,” said Paul Parker, head of global M&A at Barclays Capital, the investment-banking unit of London-based Barclays Plc.

U.S. companies taking advantage of cheaper financing include Microsoft Corp., PepsiCo Inc. and Hewlett-Packard Co., which won a $2.35 billion takeover battle for 3Par Inc. in the third quarter and also agreed to buy ArcSight Inc., a maker of network-security software, for $1.5 billion.

Microsoft last week sold $1 billion of three-year notes at 0.875 percent, the lowest interest rate on record for that maturity, according to Barclays Capital data.

Buyouts also recovered in the quarter, with takeovers involving private-equity firms more than tripling from a year earlier to $58.3 billion. Burger King Holdings Inc. agreed to be acquired by 3G Capital for $3.3 billion in the biggest restaurant deal in at least a decade, while CVC Capital Partners Ltd. agreed to buy TDC A/S’s Swiss unit for 3.3 billion Swiss francs ($3.4 billion).

Tax Driver

Private-equity firms may do more deals in the remainder of the year as they race to sell assets ahead of possible tax changes in the U.S., according to Jeffrey Raich, managing director and co-founder of Moelis & Co. The rate on carried interest, or the share of profits that fund executives earn as part of their compensation, is slated to rise to 20 percent in 2011 from 15 percent currently.

“You are seeing a lot of seller deals based on concerns about increases in capital-gains tax rates and potential legislation around carried interest have driven private-equity firms to sell portfolio companies this year,” Raich said. New York-based Moelis advised Connecticut-based buyout firm Littlejohn & Co. on the $890 million sale of Van Houtte Inc. coffee to Green Mountain Coffee Roasters Inc. this month.

Blackstone Group LP, the world’s biggest private-equity firm, said Sept. 23 that a $10 billion buyout is possible as banks are more willing to lend.

Failed Deals

To be sure, volatile markets and the outlook for earnings in certain industries are making some deals hard to get done. At least one buyout failed to materialize when talks ended between disk-drive maker Seagate Technology Plc and private-equity firms TPG Capital and Silver Lake for a $7 billion deal, people with knowledge of the discussions said last week.

P&G dropped a plan to merge its Pringles unit with Diamond Foods Inc. in August, people with knowledge of the talks said this month. Confidence among U.S. consumers in September fell to the lowest level in seven months as Americans became more pessimistic about the labor market, according to Sept. 28 figures from the Conference Board.

“I’m the most positive I’ve been since the beginning of the year, but I don’t think we are about to experience a new M&A boom,” said Giuseppe Monarchi, head of Europe, Middle East and Africa M&A for Credit Suisse Group AG.

‘Significant Confidence’

Mergers and acquisitions will be the most robust in the financial-services, technology and natural resources industries, said Peter Weinberg, partner and co-founder of Perella Weinberg Partners in New York. He said improved confidence at the start of the year has been the impetus for activity now because of the typical six- to nine-month lag time to arrange a deal.

“People had significant confidence in the equity markets, the financing markets or their own strategic aspirations,” said Weinberg.

The S&P 500 Index rallied 80 percent from its bear market low in March 2009 through April 23 of this year, data compiled by Bloomberg show. The benchmark gauge for U.S. equities then retreated 16 percent through July 2 and has since rebounded 12 percent.

Goldman Sachs Group Inc. is the top takeover adviser this year with $325.9 billion of deals and was followed by Morgan Stanley, which has $301.6 billion, according to Bloomberg data. New York-based JPMorgan Chase & Co., which is advising BHP on its Potash Corp. bid, ranked third with $263.1 billion in deals. Credit Suisse and Bank of America ranked fourth and fifth, the data show.

“We are cautiously optimistic about next year,” said Hernan Cristerna, JPMorgan’s head of European M&A in London. “Conditions are in place for 2011 to be better than 2010 in terms of volumes.”

AIG Reaches a Deal to Fully Repay Taxpayers

USA Today

American International Group, which drew the brunt of public anger over big federal bailouts during the financial crisis, has reached an agreement with the government on a plan to pay back its debt, AIG announced Thursday.

Under the plan, taxpayers should at least recoup their investment and possibly turn a profit, analysts say.

"This is a pivotal milestone as we deliver on our long-standing promise to repay taxpayers, and we thank the America people for their support," AIG CEO Robert Benmosche said.

Treasury Secretary Tim Geithner said the plan "dramatically accelerates the timeline for AIG's repayment" and positions taxpayers to recover their investment.

The insurance giant received a $182 billion federal bailout package as it teetered near collapse in September 2008 amid the subprime mortgage crisis. AIG was nearly shut down by its massive stake in derivatives known as credit default swaps — essentially insurance against the risk that certain mortgage securities would default.

Its outstanding debt to the government is about $95 billion.

Under the plan, the Treasury Department would convert $49.1 billion in AIG preferred shares into common stock. Treasury's stake in the company would rise from about 80% to 92%. It would sell its shares over what's expected to be one to two years.

Treasury is expected to receive about 1.66 billion shares, and it stands to break even if it sells them for about $29 a share. AIG shares closed Thursday at $39.10, up $1.65.

Before the stock conversion, AIG must repay a $20 billion debt to the Federal Reserve Bank of New York that was part of the bailout. AIG plans to sell assets to fund it. Treasury also will take over $22 billion of $26 billion in preferred shares the Fed owns in another AIG vehicle. AIG plans to sell other assets to repay Treasury and the rest of the Fed's stake.

Analyst Christopher Whalen of Institutional Risk Analytics says the government's sale of AIG shares will dilute the stock in a sluggish market, hurting shareholders: "We don't need another big seller in the market."

UBS analyst Andrew Kligerman says Treasury is getting fewer shares than expected, making the deal less diluted for shareholders. AIG also plans to issue 75 million warrants to existing shareholders, allowing them to buy shares over 10 years at a $45 strike price — an effort, Kligerman says, to compensate them.