Category Archives: Corporate Civil Litigation

The Latest JP Morgan Chase Lawsuit

On August 9, JP Morgan Chase & Co. agreed to cover almost 20 percent of a $6.05 billion deal to settle a price-fixing case brought over credit-card swipe fees.  JP Morgan is the second-largest U.S. credit card issuer according to the Nilson Report.  In 2005, the plaintiffs, merchants and retail industry associations, filed fourteen actions, namely alleging that JP Morgan & Chase Co. conspired with MasterCard and Visa to rig credit-card processing fees.  In order the settle the lawsuit, Visa and MasterCard, along with a handful of U.S. banks agreed to pay $6.6 billion and reduce credit-card swipe fees temporarily.  The deal includes cash payments of $6.05 billion for the class action participants and $525 million to individual plaintiffs.

It’ll be interesting to see how many of the plaintiffs agree to participate in class action lawsuit and how the settlement affects JP Morgan’s stocks, as the shares were down 0.4% in recent trading.

 By Jenna Hennig

Shareholders Recovering Damages From… Shareholders?

Michael Orey over at BusinessWeek wrote a commentary about a problem with shareholder class action suits against their corporation, particularly concerning a case against Bank of America alleging failure to disclose bonuses set to be paid to Merrill Lynch employees. His concern centers on the fact that the former shareholders of BOA (they have since sold their securities after seeing its value drop due to the alleged misconduct) are seeking to recover directly from the corporation – in effect forcing existing shareholders to cover any resulting damages. The main problem is that the shareholders who did not sell their shares after the drop in value will now have to also bear the costs of paying to settle this lawsuit – even though the true wrongdoers are the officers of the corporation who allowed the alleged misconduct. Further, because the true wrongdoers are not being punished, the result of the lawsuit will not deter similar future conduct. The system seems to be clearly flawed and needs a change.

Helio Castroneves Acquitted of Tax Evasion

helio_castronevesHelio Castroneves was acquitted Friday of all five tax evasion charges stemming from his alleged formation of foreign shell corporations to hide certain racing revenue.

ESPN reported that the case really ended up coming down to testimony from Castroneves’s father regarding the original formation of the foreign corporations. He claimed his son never had any control or ownership interest in the corporations and that Helio had no control over their initial formation. The jury obviously believed Helio and his father regarding the tax evasion but was still hung on one conspiracy charge. The Government likely will not pursue the conspiracy issue any further though. Helio could have faced up to six years in prison had he been convicted.

Both Helio’s sister, who is his business manager, and Alan Miller, Helio’s attorney responsible for his financial planning and structuring, were acquitted of their tax evasion charges as well.

Investors Push Towards Madoff Bankruptcy

Five of Bernard Madoff’s investors filed a petition to force Madoff into an involuntary Chapter 7 bankruptcy on Monday. The petition comes after U.S. District Judge Louis Stanton of the Southern District Court of New York ruled on Friday that bankruptcy would be the best way for investors to reclaim their lost assets and lifted a stay obtained by the Securities and Exchange Commission (SEC) to block any litigation against Madoff. Although the SEC and Department of Justice fought the lifting of the stay claiming that an involuntary bankruptcy would only delay recovery and add to administrative costs, Judge Stanton stated that those concerns were “speculative” and “outweighed by the benefits to Mr. Madoff’s victims of a bankruptcy trustee’s orderly and equitable administration of his individual estate.” The number of investors included as creditors under the petition will undoubtedly increase as five is merely the minimum number of creditors required to file an involuntary bankruptcy under the U.S. Bankruptcy Code.

Update on Castroneves Tax Evasion

Here’s an update on Helio Castroneves’ tax evasion case. Apparantly Helio is in the hole for more than $2.3 million now. And, according to Joann Levitt, the IRS agent and the Government’s last witness, the case hinges on whether Castroneves actually secretly owned the Panamanian shell corporation, Seven Promotions. According to Levitt he did, and the $2.3 million owed as a result of $5 million “earned” by Seven Promotions was money simply never reported on Castroneves’ tax returns. More news to come in the next few weeks as the case should be put in front of a jury sooner rather than later. Castroneves, in fact, will miss the IndyCar season opener April 5 in St. Petersburg, Florida because of the recent delay in the case proceedings.

Racing Star Uses Foreign Shell Corporations to Hide Taxable Income

Helio_Castroneves1290x329Sports Illustrated recently reported on Indy Racing star Helio Castroneves’s tax evasion case. The IRS and the U.S. Department of Treasury claim that Castroneves set up foreign shell corporations ran by his family to specifically hide taxable income.

The Government claims that Castroneves hid about $480,000 in taxable income in a Panamanian corporation called Seven Promotions and roughly $5 million in a shell Dutch corporation with the intent to eventually move from the United States to tax-haven countries like Andorra or Monaco with the money.

While Castroneves’s celebrity reputation would normally help him in front of a jury, we need not look too far in the past to see that celebrities are not necessarily immune from serious penalties for tax violations – as evidenced by the recent three year prison sentence handed down to Wesley Snipes for failing to file tax returns.

US Threatens Prosecution of UBS Top Executives

The United States government is pressuring UBS once again — but this time the target is UBS top executives. During a senate subcommittee hearing yesterday, the US Justice Department indicated that they may seek prosecution of top UBS executives. But will the Justice Department follow through on this, or is it just a tactic designed to put pressure on UBS to turn over more account information?

The Justice Department’s tax division acting assistant attorney general, John DiCicco, has said that he would not, “rule out one way or the other whether there will be prosecutions.”

Given the potential consequences to UBS, and even Switzerland, of disclosing more account information, the threat of prosecuting UBS executives could just be a measure designed to pressure UBS into more disclosure.

UBS is resisting more disclosure because of the interference of Swiss banking traditions and stability and the potential threat of losing clients en masse as a result. This could all deliver a big blow to the Swiss banking industry, and Switzerland may not have the resources to shore up banks like other countries have.

So, if the threat of UBS executive prosecution is just that, a threat, is it enough to force UBS into more disclosure?