Legal Radar

Judge: GM Can Retain Its Bankruptcy Protection

A federal judge early this week ruled that GM (General Motors Co.) can hold on to its bankruptcy protection, which allows it to halt legal claims worth billions of dollars from consumers seeking damages over a faulty ignition switch.

Robert Gerber, a U.S. bankruptcy judge, who heard the oral arguments, submitted a 134-page ruling indicating that he couldn’t find evidence where GM carried out fraudulent acts in court when it participated in the bankruptcy process. The protection curbs customers from filing suit for compensation for injuries sustained and declining resale values to older GM vehicle models equipped with faulty ignition switches.

Attorneys of the plaintiffs argued that GM mislead the court for not revealing the faulty ignition switch matter, which it had knowledge of back in 2005. GM said its executives weren’t informed of the issue until 2013, which pushed for a 2.6-million vehicle recall a year later. The ignition switch problem has now been linked to over 80 deaths and more than 100 injuries.

Fraud Making Its Way to Apple Pay

Banks have observed a growing fraud occurrence in Apple’s mobile-payment system as criminals continue to exploit the verification process credit card additions, some tech observers say.

Banks have tightened the process of verification to fight off the fraud.

The fraud issue was brought up by Cherian Abraham, a payment systems expert who collaborates with retailers and financial institutions on mobile payment solutions.

Abraham indicated that it’s never an anomaly to observe fraud making up about 6% of Apple Pay transactions, compared to the 0.1% payment transactions via a plastic card swipe. He also said the rate of frauds vary from one issuing bank to another.

Apple Pay utilizes a secure element in its latest iPhone models to store encrypted payment information separately from the rest of the mobile device. A fingerprint reader ensures the owner of the phone has made the purchase and issues a one-time code entry so merchants won’t see credit card details from the buyer.

Creating a card provisioning process is time consuming and may turn away potential Apple Pay consumers.

Former Dewey Leaders Trial to Begin in April

The Dewey & LeBoeuf trial will have a starting date.

The now-defunct law firm’s three ex-leaders (Steven Davis, Joel Sanders, and Stephen DiCarmine) will appear in court this April 27 to start the trial, which is expected to last up to six months.

All three were accused of accounting fraud as part of a scheme to conceal the true nature of Dewey’s financial status, which led to the firm’s unexpected collapse in 2012. All three claimed to be innocent and are free on bails while awaiting trial.

In a New York Supreme Court early this week, the trio sat quietly while Justice Robert Stolz pressed counsel of both parties for a trial date. Stolz initially wanted a February start but both parties made delay requests.

Davis’ attorney, Elkan Abramowitz, said he’ll wait until he has knowledge of the Bermuda court outcome regarding the amount of insurance available for his client’s defense.

Former Madoff Staff Gets 10-Year Prison Sentence

An ex director of operations for Madoff’s firm was served a 10-year prison sentence early this week for aiding a Ponzi schemer to carrying out one of the largest financial frauds in the country’s history.

Daniel Bonventre, who was responsible for spearheading Madoff’s business for nearly 40 years, is the first of several ex-employees to be convicted in assisting and hiding the scheme this week. Early this year, a federal jury in Manhattan found Bonventre guilty in creating false records for Madoff.

Bonventre was asked to forfeit a portion of the $155 billion of funds he solicited and were eventually invested in the firm.

Several Madoff defendants were guilty of conspiracy to defraud investors and securities fraud. Two of them were trading managers while the other two were computer programmers.

Bonventre’s thorough bookkeeping and careful watch allowed him to carry out one of them most effective schemes for the past several decades.

Madoff Trustee Settles with Investors for $497 Million

A court settlement will bring close to $500 million to investors Bernard Madoff cheated on, placing their overall recovery to date well over $10 billion.

Irving Pacard, an official appointed by the court, tracked down the stolen money in one of the biggest Ponzi scheme in the history of the country, announced early this week that Herald Fund SPC and Primeo Fund, made an agreement to return back $497 million they received through their investment with Madoff.

The settlement rakes in total recovered funds in Madoff’s liquidation investment firm to over $10 billion, where close to $6 billion were given back to investors. Investors lost more than $17 billion in principal from Madoff’s Ponzi scheme collapse, in which he’s currently under a 150-year sentence in prison.

Based on latest court documents obtained on the legal issue, the settlement will let Madoff’s investors recover 1.32% of their claims than they’d have otherwise.

Facebook Suing Attorneys for Fraud Contribution

Facebook CEO Mark Zuckerberg filed a lawsuit against Paul Ceglia’s attorneys, saying they assisted their client on a defraud attempt against the world’s largest social network as well as its founder.

A number of lawyers have represented Ceglia especially those from law firms DLA Piper and Milberg.

Facebook believed Celia crafted a scheme to defraud Facebook and its CEO. In the end, a grand jury gave an indictment against Ceglia on federal fraud charges.

Facebook attorneys say Ceglia’s lawyers should’ve been aware of their client crafting false claims from forged papers.

Ceglia was named as a defendant in the suit filed in a Manhattan state court as well as Paul Argentieri, one of this lawyers, whom Facebook believed to have assisted in the fraud.

The suit received big exposure when DLA Piper handled Ceglia as a client, offering legitimate grounds to his claims.

 

 

Zuckerberg and Facebook demand to be reimbursed for punitive damages and legal costs. They didn’t indicate the precise cost.

Georgia: Voter Registration Drive Pushes to Suit

With just under three weeks prior to elections for the governor and U.S. Senate, an escalating battle between a Republican secretary of state of Georgia and a Democratic-favoring voter registration group is making a move to court.

Third Sector Development Inc., a non-profit parent of the New Georgia Project, filed a suit against Brain Kempt, the Secretary of the State, and several other county election board members, alleging the officials to have failed in processing thousands of vote applications for next month’s vote.

Another group, The National Association of Advancement of Colored People, joined the suit.

The New Georgia Project indicated it gave over 80,000 new voter applications to the county election boards. But it seems that the new board couldn’t spot records of over 40,000 of its vote applications.

The lawsuit, filed last week, came weeks after Kempt began an investigation on a possible fraud for certain applications given by the group.

Kemp’s counsel, Ryan Germany, sent a letter to Washington indicating more details on voter application is needed.

Paulson Makes Testimony in AIG Case

Henry Paulson, an ex-Treasurer Secretary, testified for a few hours early this week prior to being dismissed as a part of a suit claiming that the AIG (American International Group. Inc.) rescue cheated $40 billion off its shareholders.

Paulson, whose testimony quickly ended, fielded inquiries of possible private-sector-based solutions for which AIG plaintiffs the government brushed off wrongfully.

Paulson happens to be one of the three engineers expected to be called in to make a testimony this week in a class action suit brought about by Starr International Co., an investment firm operated by Maurice Greenberg, an ex-CEO of AIG.

Paulson was thrown a number of questions by trial attorney David Boies regarding an overture from a Chinese wealth fund that the former treasury secretary staff learned on Sept 16 back in 2008.

Paulson was also testified that the Chinese weren’t aware of the severity of monetary crisis.

The AIG rescue package received approval on the same evening the overture was done

Napkin Middleman in Inside Trading Case Pleads Guilty

A mortgage broker known as the napkin middleman in an insider trading ring pleaded guilty for his part in the alleged scheme, which consisted of stock tips provided by a worker at an NY law firm.

Frank Tamayo, 41, gave himself up to the FBI last week and pleaded guilty to a single count of conspiracy to commit fraud, a single count of securities fraud, and one count of tender offer fraud.

Tamayo was the primary source for inside trading tips that ex-clerk Steven Metro picked up from the law firm’s computers. He then handed the information to Vladimir Eydelman, a broker dealer.

Metro shared inside tips to a friend on a number of meetings. His friend then passed on the tip to a stockbroker.

Eydelman, 42, then traded on the information acquired. The scheme was said to have netted over $5 million.

Tamayo will face a maximum 5-year prison penalty plus a $250,000 fine and a maximum potential penalty of 20 years in jail including a $5 million fine.

Court Decides Fate on Moscow Confidentiality Breach

John Moscow, an ex-prosecutor from New York, will be facing a hearing this week as to whether he breached his previous client’s confidentiality when he started fighting companies belonging to a Russian accused of making Manhattan properties purchases with a tax fraud of $230 million.

Moscow is defending firms currently owned by Denis Katsyv, who is believed to have funded laundered money to purchase properties. Moscow was retained by an attorney for William Browder, a hedge fund manager currently based in London, a key witness in the government case against Katsy’s companies.

A NY judge will consider a hearing later this week as to whether or not Moscow and his law firm have pertinent details that will offer them an edge in questioning Browder.

Last month, the Committee on Grievances of the Southern District of NY shot down a complaint by Browder against Moscow. The decision of the committee gives Browder the option to request a hearing from Judge Griesa.