July 2010 Archives

Payola. It is frequently used as an antiquated term to describe a time when managers and record labels paid DJs to play their music. This practice is also called "pay to play". While payola is not done as openly as it once was, the practice is very much alive today, as a recent case against Univision demonstrates.

On Monday, the Federal Communications Commission and the Justice Department announced two separate settlements of payola charges with the Spanish language media company, Univision, the Associated Press reports. The settlement was for $1 million. The FCC and Justice Department alleged that Univision's radio stations and its employees took cash payments in exchange for more frequent airplay of artists previously on the Univision label.

According to the AP, from 2002 to 2006, Univision employees bribed program managers to entice them to play Spanish artists and did not disclose the payments. Payola is a violation of FCC regulations and federal law. As part of the settlement with the Justice Department, Univision pleaded guilty to conspiracy to commit mail fraud. Conspiracy is an agreement between two or more persons to engage in an unlawful act. Mail fraud is a crime in which the perpetrator intentionally uses the mail to defraud another of money or property.

Dell is under fire after settling with the Securities and Exchange Commission for $100 million. The computer maker was accused in the securities fraud case of misleading investors by taking money paid by Intel to inflate the company's quarterly earnings statements. Company executives then allegedly used the Intel payments to help surpass expectations on Wall Street. The SEC further alleged that Intel made payments to Dell to get them not to use Advanced Micro Devices' chips and that the payments accounted for a staggering 76% of Dell's income in 2007. As is typical in SEC settlement agreements, Dell did not admit to the accusations.

Many analysts have said that Intel subsidized a large segment of the computer manufacturing industry. It worked as follows: Intel would pay Dell through rebates as long as Dell agreement not to use computer chips made by AMD. The arrangement is currently the subject of federal and state inquiries.

"It's my doll!" "No, it's my doll!" That is what this lawsuit would sound like if the opposing parties were, say, six. However, in this case the parties include a giant toy corporation and the "it's my doll" argument takes on bit bigger ramifications. A 9th Circuit Court of Appeals judge has just taken Mattel's rights to the Bratz line of dolls away and given them back to the original owner, MGA Entertainment, Inc. At least for now.

In their decision on July 22, the 9th Circuit found that the lower court had erred in forcing MGA to give over the bratty dolls to Barbie-maker, Mattel, Inc. According to Reuters, Chief Judge Alex Kozinski rescinded the injunction prohibiting MGA from selling the dolls. The case began back in 2008, when the verdict from a federal jury in Riverside, California ordered MGA and its Chief Executive Isaac Larian to pay Mattel $100 million in damages. The jury found that Barbie designer, Carter Bryant, was under contract to Mattel when he sold MGA some drawings upon which the Bratz dolls were based.

This is one legal decision that is anything but boring. A mix of great art, Nazis, and delayed compensation for a stolen family possession would interest just about anyone. A settlement of $19 million was announced on July 20, between Austria's Leopold Museum and the family of a Jewish art dealer from whom an Egon Schiele painting was stolen more than half a century ago.

According to The Wall Street Journal, the original owner of the painting was an Austrian art dealer by the name of Lea Bondi Jaray. Jaray fled Austria for England in 1939, leaving Schiele's portrait of his "redheaded mistress" Valerie Neuzil, called "Portrait of Wally," behind. After the end of the war, Allied authorities liberated the painting from Nazi clutches, and turned it over to the Austrian Federal Office for the Preservation of Historical Monuments. The painting was then sold to the Austrian National Gallery, who sold it to collector Rudolf Leopold, who set up the Leopold Museum which housed the portrait.

Pardon me friend, can you spare $725 million? It sounds like an insane question, but the answer in this case is a resounding yes. It always helps when the government already gave you $182 billion (for an 80% stake in the company). Yes, we're talking about AIG.

American International Group Inc. and several company officers and directors have agreed to pay $725 million to settle fraud claims made in a class action investor suit. The settlement will still require final approval from the court. AIG was accused of anti-competitive practices, accounting violations, and manipulating stock prices. The case, led by three Ohio pension funds, brings the total AIG settlement to about $1.7 billion. AIG previously settled with shareholders for $1 billion.

AIG was accused of a host of violations of the law, including $3.9 billion in fraud, bid-rigging, stock price manipulation and more.

It appears a settlement has been reached in the suit between a Watertown, South Dakota, woman and GlaxoSmithKline, makers of the drug Paxil. The plaintiff, Jennifer Berg, sued the pharmaceutical company after she claimed her use of Paxil during pregnancy was the cause of a heart defect that killed her infant son.

The Associated Press reports that letters from Berg's attorneys to the judge presiding over the case indicate a settlement has been reached. There are currently no court filings confirming a settlement. GSK has said that it expects to spend about $2.36 billion of its second quarter earnings to settle or make agreements to settle various cases over Paxil and the diabetes drug Avanida which is also the subject of multiple lawsuits.

Goldman Sachs Group and the U.S. Securities and Exchange Commission have settled the highest profile SEC fraud case, a $550 million settlement arising from the 2008 financial crisis and how Goldman marketed a subprime mortgage product. The settlement is the third largest SEC settlement ever made. The Los Angeles Times is reporting that the settlement gives each side a measure of what they needed in order to move on.

The SEC voted 3-2 to settle fraud charges with Goldman. The two Republican SEC commissioners, Troy Paredes and Kathleen Casy, voted against the settlement, Reuters reports. The same two commissioners also dissented when the SEC opted to file fraud charges against Goldman.

The settlement gives the SEC the an answer for those who say the government has not done enough to come down on Wall Street. It will also allow Goldman to move on, as the fine, while massive, can easily be paid by Goldman. Goldman made a profit of $13.4 billion last year alone. Goldman called the settlement "the right outcome for our firm, our shareholders and our clients."

Novartis Pharmaceuticals has reached a settlement in the gender discrimination class action filed by a number of its women employees. Although a May 19 jury verdict had already awarded $250 million in punitive damages to a group of 5,600 employees, the company and plaintiffs came to an agreement which will cost the company $152.5 million. There will be no appeals or other challenges which might have affected the jury verdict.

The Washington Post reports the suit was originally filed in 2004 by Amy Velez and four other women who claimed they faced discrimination over pay and promotion and for pregnancy. The jury found Novartis liable for gender discrimination on May 17 and awarded $3.4 million in damages to 12 of the plaintiffs. Two days later, the jury awarded another $250 million in punitive damages.

With a 5-4 vote, the D.C. Court of Appeals has upheld same-sex marriage in D.C. The appeal came after a Superior Court judge sided with the D.C. Board of Elections and Ethics, which had rejected an initiative to have the gay marriage issue decided by popular vote rather than the D.C. Council. The council had voted to allow same-sex marriage last December.

Last May, attorneys representing opponents of gay marriage, supported by the group National Organization for Marriage, argued before the D.C. Court of Appeals that the decision of the board had violated the District's Human Rights Act by authorizing same-sex marriage.

The court was asked to resolve the following legal question: did the District of Columbia Board of Elections and Ethics act lawfully when it rejected the proposed initiative on the ground that it would authorize discrimination prohibited by the Human Rights Act?

Is a settlement a diamond company's best friend? The answer to that question will have to wait for De Beers, the world's biggest diamond producer. On July 13, a federal appeals court refused to approve the settlement in a class action suit against De Beers by diamond purchasers who have claimed the company broke anti-trust laws. The settlement has been sent back to a lower court for reconsideration.

According to a report by Reuters, De Beers plead guilty in 2004 to a price fixing charge. The company came to an agreement in 2005 to set up a fund worth $272.5 million to compensate indirect purchasers of De Beers diamonds.

A federal appeals court has struck down the Federal Communications Commission's indecency rule. The ground breaking case is a major win for Fox Television, CBS Broadcasting, ABC and broadcast stations in general. The case is titled Fox Tel. Stations, Inc. v. FCC, 06-1760.

The court found that the FCC indecency rule is unconstitutional as it violates the First Amendment.  The case revolves around so called, "fleeting expletives," when a person says an expletive in an unscripted way. The most famous case was from Bono of the band U2 in 2003, who said at the Golden Globe Awards, upon receiving an award, "this is really, really, f**king brilliant. Really, really, great."

Up until that point, when considering indecency, the FCC had considered (1) whether the material "describe[s] or depict[s] sexual or excretory organs or activities"; and (2) whether the broadcast is "patently offensive as measured by contemporary community standards for the broadcast medium." The FCC further explained that it considered the following three factors in determining whether a broadcast is patently offensive: (1) "the explicitness or graphic nature of the description or depiction"; (2) "whether the material dwells on or repeats at length" the description or depiction; and (3) "whether the material appears to pander or is used to titillate, or whether the materials appears to have been presented for its shock value." The FCC reiterated that "fleeting and isolated" expletives were not actionably indecent.

A federal judge has ruled that the federal ban on gay marriage is unconstitutional. U.S. District Judge Joseph Tauro ruled on Thursday in Gill v. Office of Personnel Management, that the 1996 Defense of Marriage Act prevented states from being able to define marriage. As defining marriage has been a state right, a federal law to ban gay marriage cannot stand, Tauro ruled. Tauro found that the law forced the state of Massachusetts to discriminate against it's own citizens. 

The lawsuit was brought by seven married gay couples and surviving spouses from Massachusetts who said they were wrongfully denied federal benefits because of the Defense of Marriage Act. The state of Massachusetts argued that under the Defense of Marriage Act, gay couples were denied benefits such as Medicaid. 

The justice department unsuccessfully argued that for a federal program, like Medicaid, the government has the legal right to set eligibility requirements restricting benefits to only couples in a marriage between a man and a woman.

On July 7, a California jury awarded a large verdict against Skilled Healthcare Group Inc, for its violations of California's health and safety code by not providing the minimum 3.2 hours of direct nursing care per day to patients at its 22 facilities. The verdict of $671 million in damages covered only $613 million in statutory damages and $58 million in restitution. The jury has not yet reached the punitive damages portion of the trial.

According to a report by Reuters, the plaintiffs in the case were comprised of a class more than 32,000 people. Plaintiffs' attorneys say they hope the verdict will bring about a "sea change" in the way not only this company, but other nursing homes do business. It will certainly affect the business of defendants Skilled Healthcare, who say they may have to consider bankruptcy.

Who gets to be a millionaire? The creators of the popular game show, "Who Wants to be a Millionaire" according to a federal jury, who came to that conclusion on July 7. The jury agreed with the plaintiffs' claims that creative accounting by the Walt Disney Company had deprived them of their rightful share of licensing fees and merchandising profits. The verdict awarded the British TV production company, London-based Celador International, a total of $269.2 million.

The Associated Press reports that plaintiffs Celador sought profits from the show from August of 1999, through the day the original complaint was filed in May of 2004. At the time Celador presented the show to Disney-owned ABC, the network was in desperate need of a hit. According to the plaintiffs' attorneys, the show was a great success and the 50-50 profit share deal should have provided big returns to both plaintiffs and Disney.