“Gundlach was found today to have breached his fiduciary duty to TCW and misappropriated its trade secrets.The Los Angeles jury awarded the company no damages on the breach claim…The jury found that Gundlach and DoubleLine didn’t act willfully and maliciously in misappropriating trade secrets.” [BW, earlier]

Credit Suisse Sued, Brokers Called Corrupt

A microchip maker is suing Credit Suisse, alleging the Swiss bank put $450 million into auction rate securities without authorization and made threats of retaliation when the company demanded its money and threatened to sue.
“Rather than siding with customers who had been victimized, Credit Suisse Group aligned itself with its wholly owned subsidiary Credit Suisse Securities and its corrupt brokers and directors,” STMicro says in the complaint filed in federal court in Brooklyn.
Credit Suisse is fighting back, calling the lawsuit “meritless,” according to Bloomberg.

Credit Suisse Sued Over Auction-Rate Securities

  • 06 Jun 2008 at 12:27 PM
  • legal

Sketchy Philadelphia Scammer Girl Gets House Arrest

jocelyn kirsch.jpgWe might not have the boys of the Plotkin plot to kick around anymore, but we still have Edward Anderton, the University of Pennsylvania economics graduate who got into trouble when he and his buxom girlfriend Jocelyn Kirsch went on an identity-theft crime spree. The other day, Anderton pleaded guilty to six counts of conspiracy, aggravated identity theft, access-device fraud, bank fraud and money laundering.
Anderton was as a financial analyst earning somewhere around $65,000 at the real-estate equity firm Lubert-Adler. So, you see, he’s really just another subprime victim. His girl, who seems to have been the one who came up with the couple’s scams, begins house arrest today while she awaits trial. Presumably, Anderton’s guilty plea is part of a bargain in which he’ll testify against Kirsch.

Kirsch ordered under house arrest, must stay in Philadelphia
[Philadelphia Inquirer]

  • 02 Jun 2008 at 3:31 PM
  • legal

Securities Class-Action Lawyer Headed To The Big House

Securities class-action laywer Melvyn Weiss was sentenced today to 30 months in prison by a federal district judge in Los Angeles for his role in concealing illegal kickbacks to plaintiffs. Weiss was a partner at Milberg Weiss, which is now called Milberg in an attempt to remove the stain of its former partner’s legal scandals. The firm was a huge player in securities class-action lawsuits, typically filed on behalf of shareholders against publicly traded companies whose share price had fallen.
This is a tough one. There’s not much to be said in favor of the class-action plaintiffs bar in general, or securities class action lawyers in general. But, then again, federal prosecutors aren’t much better. And the feds regularly do what Weiss was accused of doing–using ‘incentive payments’ to get witnesses to support their case. Here’s how former Millberg Weiss partner William Lerach, who is serving a two-year sentence as a result of the same investigation, tells his side of the story to Portfolio.
Class-Action Lawyer Gets 30 Months in Prison [New York Times]

  • 02 Jun 2008 at 10:48 AM
  • Citigroup

Why Did This Citigroup Trader Go To Jail?

The power of federal prosecutors is on gruesome display in the latest issue of Fortune, which chronicles the story of former Citigroup commodities trader Craig Gile who found himself jailed for allegedly cooking the books at his trading desk. The strongest evidence against him is that he seems to have corrected some reports that overstated the value of his desk’s assets, which prosecutors construed as evidence of knowledge that his desk was engaged in chicanery. First Citigroup flipped on him and then his immediate supervisor. With the odds stacked against him, Gile (whose name is unfortunately pronounced like “guile”) pleaded guilty and was sentenced to a year in federal prison.
The prosecutors seem to have been motivated more by the urge to set an example for others than by the gravity of Gile’s alleged wrong-doing. Here’s how Fortune describes the situation:

[W]hen it comes to Wall Street, in the absence of clear rules and a lack of close regulatory supervision, the thinking among prosecutors and judges seems to be that the aggressive pursuit of a select few will be a deterrent to thousands of other traders who might be similarly tempted. Jonathan Streeter, the assistant U.S. attorney who handled the case, said he couldn’t comment. However, an attorney who formerly worked in the Southern District says there are very stringent rules in the office about how far a prosecutor can bend to show leniency to a defendant. “Once that train gets on that track,” says Chauvin, “it is almost impossible to derail.”

Trader, father, veteran, convict

Lawyers in the two dozen or so proposed class action suits filed in connection with the failure of the auction rate securities markets may be “unable to prove their clients lost money or collect fees for themselves,” writes Bloomberg’s Thom Weidlich. We’re not so sure the defendant broker-dealers and issuers in these cases should be so confident.
Find out why after the jump.

Read more »

  • 05 May 2008 at 10:23 AM
  • legal

Yahoo’s Google Hug Defense: Is That Legal?

The key to Yahoo! chief Jerry Yang’s apparently successful attempt to avoid being Microserfed was the threat to enter into a partnership with Google. Under the proposal, Yahoo! would outsource to Google important paid search terms, a move that struck many as all but admitting that Yahoo was incompetent at monetizing search terms and that seems to have driven away Microsoft’s Steve Ballmer.
It was a cagey move but is it legal? Can the management of a public company targeted for opposition adopt a perhaps suicidal business plan to drive away suitor? Maybe not. Although Delaware courts—which, for quirky federalist reasons, get to decide these things—give companies broad leeway to undertake defensive measures, there are supposed to be limits to this sort of thing. Stephen Bainbridge, one of our favorite law professors, explains that Yang’s takeover defense might be acceptable to Delaware courts if he could prove it was part of Yahoo’s long-term business plan. But that seems implausible—everyone knows they came up with this as an ad-hoc defense.
If Microsoft really wanted to get hostile, they might have actually been able to get a Delaware court to stop Yahoo from running into the arms of Google.

Using a strategic partnership as a poison pill

Morgan Stanley Sued Over Auction Rate Securities

More auction rate securities lawsuits are hitting the courts. A lawsuit was filed today in federal court in Manhattan alleging that Morgan Stanley “deceptively marketed” auction-rate securities as cash alternatives, Market Watch is reporting.
“Instead of disclosing the true nature of ARS and the substantial liquidity risks associated with them, Morgan Stanley continued to push as many ARS as possible onto its customers in order to unload the inventory off its already troubled balance sheet,” the lawsuit said.
The complaint seeks to compel Morgan Stanley to refund investor money by having it rescind millions of dollars of ARS transactions. It also seeks compensatory and punitive damages. The lawsuit is being brought as a class-action suit on behalf of thousands of investors who acquired auction-rate securities from Morgan Stanley between March 25, 2003, and Feb. 13, 2008,.
Similar suits have been filed against Deutsche Bank and UBS. Merrill Lynch has also been threatened with lawsuits by investors, although none have been filed. Goldman Sachs has been rumored to have been quietly bailing out some customers, including high ranking Goldman executives, whose assets were frozen when the auction failes.

Morgan Stanley sued over auction-rate securities marketing
[Market Watch]