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November 2014 Archives

Business Litigation: Bio Rad Agree to Multi Million Settlment

Bio-Rad agrees to Pay $55 Million in Business Litigation Settlement

Life Sciences, Pharmaceutical and Medical Device Companies Under Increased Scrutiny by Department of Justice and the SEC

Over the last several years, multinational companies of various sizes and geographical reach in the pharmaceutical, medical device, and biotechnology industries have found themselves in the crosshairs of the U.S. Department of Justice ("DOJ") and U.S. Securities and Exchange Commission ("SEC") as both agencies continue their aggressive enforcement of the Foreign Corrupt Practices Act ("FCPA"). Many such life sciences companies have already resolved FCPA matters with the U.S. government, and numerous others have disclosed that they are subject to ongoing investigations. Last week, the government delivered yet another reminder that this enforcement trend will continue as a California-based, multinational medical diagnostics and life sciences company, Bio-Rad Laboratories ("Bio-Rad"), agreed to pay a total of $55 million to resolve parallel FCPA investigations by the DOJ and SEC involving payments made to government officials in Russia, Vietnam, and Thailand. Bio-Rad's settlement with the SEC included $40.7 million in disgorgement and prejudgment interest, which represents the tenth largest disgorgement in any FCPA-related enforcement action brought by the SEC. Bio-Rad also entered into a non-prosecution agreement with the DOJ, pursuant to which it agreed to pay a criminal fine of $14.35 million and report its compliance efforts to the government for a period of two years. The Bio-Rad Investigation The DOJ and SEC investigations of Bio-Rad primarily focused on the company's sale of clinical diagnostic products, such as HIV kits, in the Russia market, where a substantial portion of Bio-Rad's business consisted of sales to the Russian government. Those sales were made pursuant to government contracts that were awarded to Bio-Rad through a public tender offer process that required approval from various government officials. From approximately 2005 to 2010, a Bio-Rad subsidiary, headquartered in France, made excessive payments to third-party intermediary companies that were retained in order to assist the company in acquiring new business in Russia (e.g., disseminating promotional material and distributing and installing products). These intermediary companies, which were incorporated in the United Kingdom, Belize and Panama, were paid commissions between 15% and 30%, which over the course of nearly five years, amounted to approximately $4.6 million on $38.6 million of sales. However, none of the third-party intermediaries actually provided, or had the capability to provide, the contracted-for services; according to the SEC, the intermediaries had phony addresses, off-shore bank accounts in Lithuania and Latvia, and no employees. The SEC charged that one of the intermediaries "even used a phony office address in Moscow that was actually the office address for a Russian government building." Moreover, each intermediary was created by the same individual, who was known to have important contacts within the Russian government and the ability to influence the tender offer process. Bio-Rad's Russian subsidiary won 100% of its government contracts when utilizing these intermediaries, and then lost its first major Russian government contract after terminating the intermediaries in 2010. The scheme was apparently effective in obtaining and retaining business--while it lasted. The SEC charged similar wrongdoing in Southeast Asia. In Vietnam, Bio-Rad sales representatives made payments to Vietnamese officials at hospitals and laboratories in exchange for their agreement to purchase Bio-Rad products. The country manager in the Vietnam office recognized the wrongful nature of the conduct, but feared losing 80% of the business without it. In order to "insulate" Bio-Rad from liability, he then channeled $2.2 million to third-party agents and distributors in the form of "advertising" and "training" fees, which were, in turn, funneled to Vietnamese government officials. In Thailand, Bio-Rad acquired a 49% interest in Diamed Thailand, as part of its acquisition of Diamed AG (Switzerland). There was little due diligence performed in connection with the acquisition and, as it turned out, the Thai affiliate operated a bribery scheme that utilized third-party intermediaries. Specifically, Diamed Thailand paid the intermediary an inflated commission of 13%, the majority of which was provided to Thai government officials in exchange for business contracts. The above conduct resulted in Bio-Rad's agreement to pay $55 million to settle the SEC's charges, which included violations of the anti-bribery, internal controls, and books and records provisions of the FCPA, as well as the parallel investigation by the DOJ. Interestingly, however, the DOJ was focused not only on Bio-Rad's failure to implement adequate controls, but also on Bio-Rad's lack of "adequate compliance systems." The DOJ's specific mention of Bio-Rad's compliance program--both in the non-prosecution agreement and its accompanying press release--is interesting given that, to date, FCPA liability has not been predicated solely upon a failure to implement a sufficient compliance program. However, it comes on the heels of the recent Smith & Wesson settlement, where the SEC's administrative order was similarly focused on compliance program failures, thus raising the question as to whether the government is setting the table to try and impose FCPA liability for the simple failure to implement adequate compliance systems. More details are in the complete business litigation article here. Originally posted by Gary Giampetruzzi, Anthony Antonelli & Amanda Pober on lexology.com. Ball and Bonholtzer - Business Litigation Attorney Los Angeles

Legal Malpractice Lawsuit, Business Fraud and $895K Accounting Settlment

Largest business fraud in the history of Western Pennsylvania.

LeNature settles with accounting firm

Oct. 8, 2014 The trustee representing creditors of bankrupt LeNature's Inc. filed notice in federal court in Pittsburgh Tuesday that an $895,000 settlement has been reached with an accounting firm hired in 2003 to investigate allegations of misconduct by executives of the former Latrobe beverage company.According to court filings, attorneys for bankruptcy trustee Marc S. Kirschner of New York said the settlement with Pascarella & Wiker of Pittsburgh is fair because creditors would have spent an estimated $3 million in legal and expert testimony fees trying to recoup more money from the accounting firm for creditors. "The Trustee believes ... that the settlement for $895,000 is in the best interests of the estate and its creditors, given the continued risk, delay and expense involved in litigating claims against (Pascarella & Wiker), the limited insurance funds available and substantial risks of collecting on any substantial judgment," James H. Joseph, a Sewickley attorney who represents Kirschner, wrote in a bankruptcy court filing. Neither Joseph nor officials with Pascarella & Wiker returned telephone messages left seeking comment on the settlement. Under the settlement, approved Sept. 23 by U.S. Bankruptcy Judge Thomas P. Agresti, Pascarella & Wiker admits no wrongdoing. The settlement with the accounting firm was reached nine months after Kirschner filed paperwork for court approval of a $23.75 million settlement in a legal malpractice lawsuit he had filed in 2009 against Pittsburgh law firm K&L Gates and attorney Sanford Ferguson. Kirschner, the court trustee charged with recovering money that CEO Gregory Podlucky looted from the company, maintained in a 2009 federal lawsuit on behalf of creditors that K&L Gates, Ferguson and Pascarella & Wiker were negligent for failing to discover Podlucky was siphoning money from the company for his own benefit. According to the malpractice lawsuit, Ferguson had contracted Pascarelli & Wiker in 2003 to help with the law firm's probe of Podlucky at the request of company directors. The law firm's probe subsequently found no wrongdoing by Podlucky. By November 2006, LeNature's was in bankruptcy and federal agents began a criminal investigation. That probe led to charges that Podlucky stole more than $800 million from banks and other financial institutions. Podlucky, his wife, son and brother, along with three business associates, are serving federal prison terms for their roles in the fraud. As seen on the 

LeNature $23mil Legal Malpractice Lawsuit, Fraud and $895K Accounting Settlment

Largest business fraud in the history of Western Pennsylvania

LeNature settles with accounting firm

Oct. 8, 2014 The trustee representing creditors of bankrupt LeNature's Inc. filed notice in federal court in Pittsburgh Tuesday that an $895,000 settlement has been reached with an accounting firm hired in 2003 to investigate allegations of misconduct by executives of the former Latrobe beverage company.

Lawyers Sued for Legal Malpractice in Bell City Council Saga

Can the City of Bell Council Members find an escape route by suing not only their City Attorney, but several outside attorneys associated with the city for legal malpractice for not informing them correctly re compensation, public meetings, and so on?

Disgraced Bell Council Members Blame Their Woes on Attorneys

March 11, 2014. By Jon Chown for The Courthouse News Service, courthousenews.com.

Breach Of Fiduciary Duty Claim Against Insurer

In this complex case, a supplementary insurer is accused of not acting in support of its obligations.

Missouri Court Allows Breach of Fiduciary Duty Claim Against Excess Insurer

11/12/2014

In its recent decision in SSM Health Care Corp. v. Repwest Ins. Co., 2014 U.S. Dist. LEXIS 158164 (E.D. Mo. Nov. 7, 2014), the United States District Court for the Eastern District of Missouri had occasion to consider whether an insured can maintain a breach of fiduciary duty claim against its excess insurer for its denial of coverage for an underlying settlement.

Legal Malpractice Law Firm Case: Jury Awards Both Sides

Jury awards the plaintiff and the defendant in this lawyer-sues-lawyer case.

More litigation is expected in a dispute over an Atlanta law firm's billing and bonuses and a partner's sudden exit from a Texas office. In September, a Fulton County jury said Helms & Greene should pay the Texas lawyer more than $550,000 in bonuses he claimed as the managing partner of the firm's Dallas office before leaving with the bulk of the office's lawyers in tow. The jury also said the lawyer, Kirk Willis, is entitled to attorney fees. Willis' lawyer, Douglas Kertscher, said he has filed an initial request seeking $216,000. The jury also awarded Helms & Greene more than $105,000 for counterclaims it filed against Willis, and a lawyer for the firm said it was considering an appeal. "Kirk was gratified that the jury found for him right down to the penny of everything we asked for," said Kertscher, a partner with Hill, Kertscher & Wharton. Helms & Greene partner Victoria Helms defended the firm at trial, and her partner Steven Greene recently entered an appearance in the case. Greene said that it was too early to say whether the firm would appeal the jury's verdict. Helms & Greene had filed counterclaims including breach of contract against Willis. "Obviously we're disappointed," said Greene, asserting that Willis "ran his own clandestine office out of our firm." Greene added that his side believes Willis had breached his contract, "but obviously the jury doesn't agree with us." Greene noted that his firm has appealed some of Fulton County Superior Judge Kelly Lee Ellerbe's pretrial rulings and said he hoped the appellate court might offer some relief. "Judge Ellerbe's a great judge, but we're interested in seeing what the Court of Appeals has to say ... about the duty of loyalty as it applies to a lawyer and what the appropriate remedies are," Greene said. According to Kertscher and court filings, Helms & Greene recruited Willis in 2009 to manage the firm's new Dallas office. Willis was a "seasoned lawyer," according to defense filings, and Kertscher described him as "brilliant trial lawyer" who in two and half years expanded the Dallas shop to include 24 attorneys. It was by far the firm's biggest office, he said. The firm currently has lawyers in Atlanta--billing more than $300,000 a month for a practice that largely consisted of insurance defense cases. Willis was on salary, but he was also supposed to collect 20 percent of any attorney fees for work he originated that was performed in other offices, and to a percentage of the Dallas office's profits, Kertscher said.

Legal Malpractice Law Firm Case: Jury Awards Both Sides

Jury awards the plaintiff and the defendant in this lawyer-sues-lawyer case.

More litigation is expected in a dispute over an Atlanta law firm's billing and bonuses and a partner's sudden exit from a Texas office.

In September, a Fulton County jury said Helms & Greene should pay the Texas lawyer more than $550,000 in bonuses he claimed as the managing partner of the firm's Dallas office before leaving with the bulk of the office's lawyers in tow. The jury also said the lawyer, Kirk Willis, is entitled to attorney fees. Willis' lawyer, Douglas Kertscher, said he has filed an initial request seeking $216,000.

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