PA Law Blogs » Business Law

Investment Firm in Philadelphia Sued for $427 Million in Federal Lawsuit

Admin2 — Tue, 03 Aug 2010 21:19:13 +0000

Cohen & Company Financial Management of Philadelphia has been sued for $427 million by Cascade Bancorp in Oregon. The Philadelphia investment firm is being accused of placing the Oregon bank at risk of falling short of meeting regulator orders to increase capital.

The bank is claiming that Cohen & Co. will not stick to an agreement established in October 2009 to settle the elimination of a liability, reports the Associated Press. The suit has been filed in the United States District Court in Eugene alleging that investors instructed Cascade Bancorp to settle a liability it had with the investment firm. The bank asserts that it established prospective agreements just last month with private investors to raise $150 million in its efforts to increase its capital levels to meet a 2009 cease and desist order. These orders can be issued by administrative agencies to stop banking practices that could potentially harm involved institutions.

As an investment firm that concentrates its fixed income services on asset managing and capital markets, Cohen & Co. is being accused of failing to uphold its obligations under an exchange agreement with the Oregon bank. In what is expected to involve complex business litigation, the firm faces charges for breach of contract, breach of the covenant of good faith and fair dealing, and meddling with business dealings.

Excessive Overdraft Fee Complaints against Pittsburgh-Based PNC Bank

Admin2 — Wed, 23 Jun 2010 11:05:00 +0000

The convenience of electronic banking has proven to be problematic for those who have been subjected to unfair and morally unacceptable calculation and collection of excessive overdraft fees. Pittsburg-based PNC Bank has significantly profited from a system designed to maximize overdraft fee revenue instead of providing customers with a debit transaction refusal or a warning of a fee before they go forward with a purchase. As a consequence, several PNC Bank customers, as well as customers of other major banks, have joined in civil action with other afflicted individuals to obtain restitution, monetary damages, and declaratory relief.

PNC’s automatic overdraft fee operates so that even a small transaction of only a few dollars will lead to a substantial charge. The first three occurrences of a debit transaction when there are insufficient funds results in an overdraft fee of $31. The fourth, fifth, and sixth occurrences lead to a $34 charge, and each additional occurrence results in a $36 fee.

The Consumer Federation of America reports that five of the ten largest banks increased their overdraft fees within the last year without creating a more consumer-friendly way of notifying individuals of their balance. The amount of profit from overdraft fees that banks like PNC have acquired increased from $17 billion in 2007 to between $27 billion and $38.5 billion for 2009.

As consumers throughout the United States affected by these overdraft fees consider filing formal complaints against PNC and other banks, there are several legal matters to take into consideration. Reverse sequencing fee lawyers will continue to investigate potential class action lawsuits against major banks like PNC, Citi, Bank of America, Suntrust, Wachovia, and Sovereign pertaining to insufficient funds/overdraft fees.

Pittsburgh Materials Technology Inc. Becomes Part of Thermacore

Envoca — Tue, 18 May 2010 21:23:49 +0000

When two companies share several common interests within their market, the potential of success in reaching a larger clientele often presents itself in the opportunity of combining both businesses. The sale of a Pittsburgh business should not always be associated with debt or inefficient management. Businesses in Pittsburgh thrive on growth and providing quality products and services to consumers. While not every PA business will agree to being sold to another company, these types of unions take place relatively frequently in Pennsylvania and throughout the United States to keep up with demand and competition.

A Pittsburgh Business Times article recently announced the sale of Pittsburgh Materials Technology, Inc. (PMTI) based in Jefferson Hills, PA, to Thermacore, Inc. in Lancaster. Based on the article, PMTI concentrates on the development of high-temperature metallic alloys, intricate metal joining, and other specialty materials for markets relating to aerospace, military, manufacture of electronic, production of metals, and energy.

In becoming a part of Thermacore, Inc., PMTI will play a role in the company providing high performance thermal management solutions to customers. Senior vice president and PMTI general manager noted in a written statement that the “union will allow us to reach customers on a global scale, and add our industry expertise to an already robust solution set.”

The United States Bureau of Labor Statistics notes that from 1995 to 2007, there were 31 union mergers that took place on a national level. When learning of a company’s union with another large business, concerned individuals often wonder if employment will be affected. While company mergers sometimes involve employee termination, this has reportedly not been the case for PMTI or Thermacore.

Financial Repercussions for BP Oil Leader Over Drilling Spill Disaster

Envoca — Tue, 04 May 2010 23:59:18 +0000

While the economic consequences of the Gulf Coast oil spill disaster are just about as uncertain as the extent of environmental repercussions, oil leader BP PLC’s reputation may experience an even greater blow than the company’s wallet.

The Gulf Coast oil rig spill occurred on April 20, 2010, but we are only seeing the beginning of its affects. BP may potentially pay hundreds upon hundreds of millions of dollars to cover damages and monetary losses, not to mention providing compensation in class-action lawsuits and various other liability claims that have already begun to mount. Some of these cases pertain to commercial fisherman, charter boat captains, resort management companies, individual property owners and injured oil workers throughout Louisiana, Florida, Mississippi and Alabama.

While no business ever expects to encounter such a catastrophe associated with their company, large corporations and partnerships must be prepared to handle far-reaching circumstances that have the potential to influence millions of people. The oil industry is one that supplies our economy significantly, yet what effective preventative measures and regulations are in place to help prevent such serious oil spills from happening?

According to a NY Times article discussing the financial impact of the spill for BP, the 1989 oil spill off Alaska cost Exxon Mobil over $4.3 billion, which included clean-up expenses, compensatory payments, settlements and fines. With the staggering costs of the 1989 spill in mind and considering that some experts are referring to the current Gulf Coast spill as the biggest oil disaster in history, BP is likely to experience significant financial loss. The article alludes to $6 million a day being spent by BP towards the oil spill disaster. The company has also stated that costs to drill and work on relief wells to plug the runaway alone could amount to as much as $300 million; however, BP is hoping that the same wells will be used at some point to produce lucrative oil supply.

Under federal law, the oil company holds responsibility for paying the costs of response to the oil spill and clean-up procedures, although help has been provided by a wide range of government agencies. With BP so far being unable to stop the oil seepage from the deepwater well, how they continue to exercise their efforts in terms of effectiveness, time, and quality will influence future business endeavors and other financial matters.

Harrisburg May File Municipal Bankruptcy for Accumulated Debts

Envoca — Wed, 28 Apr 2010 10:00:30 +0000

Anyone who has ever needed to file bankruptcy to overcome debt is familiar with the intensive commitment required in order for the process to be successful. Imagine what a city must handle when filing for municipality bankruptcy. According to The Wall Street Journal, Harrisburg, Pennsylvania may file for municipal bankruptcy (Chapter 9) to help the city with a $288 million debt. In addition, Harrisburg’s annual budget has been surpassed by the $68 million in payments on the debt this year.

Municipal bankruptcy is available as an option in order to help protect a troubling city from creditors as that city works on developing and negotiating a plan for solutions to debt. The Administrative Office of the U.S. Courts makes it known that there are several ways for a municipality to reorganize its debts. Some ways include lowering the amount of principal or interest, giving the time when financial payments or repayments are due an extension, or refinancing the debt by getting a new loan.

Filing for Chapter 9 seems to have received support from Harrisburg officials who believe it will provide the most immediate means of reaching a solution. However, the process requires Pennsylvania’s community and economic department approval, and may be pricey and take up quite a lot of time. A few benefits to municipal bankruptcy are that assets of the municipality will not be liquidated, nor will assets be required to be sold. The article mentions that Chapter 9 will allow an automatic stay of all litigation and provides municipalities with an opportunity to refuse union contracts.

The outcome of bankruptcy filing cannot be predicted, but it is certain that staying in debt will only make matters worse for any U.S. city. If Harrisburg does not end up filing for municipality bankruptcy, it may seek financial distress status under state law. Hopefully, discussions among creditors and city council members will result in a prospective plan to help Harrisburg recover and gain momentum once more.

U.S. Business Work Force Plans to Increase, Says Industry Survey

Envoca — Wed, 28 Apr 2010 01:10:00 +0000

Businesses throughout the United States have needed a boost for quite some time, and according to a National Association for Business Economics industry survey, they may get just that. A recent Insurance Journal article discusses the results of the assessment, reporting that the insurance industry and other U.S. companies expect to add to their work force within the next six months.

More specifically, the survey, which was held between March 25 and April 10, reveals that 37% (compared to 29% in January) of the 67 members who participated in the survey anticipate an increase in payrolls.

With businesses expecting to help curb the high rate of unemployment in the U.S. by increasing the rate at which new employees are being hired, recovery should gain speed, especially if the conditions of businesses keep improving. According to the survey, most of the participants within the finance, insurance and real estate businesses hope to increase their incoming rate of new employees by the end of the first half of this year.

The article cites William Strauss, senior economist at the Federal Reserve Bank of Chicago and economic adviser for the NABE, in saying, “After more than two years of job losses, job creation increased in the first quarter.”

According to the article, the survey claims that more businesses are resupplying their stock of goods and redeveloping inventories after liquidating them to all-time low levels during the recession in order to handle the feeble demand. The labor market has shown improvement and contributed to a boost in manufacturing movement. The survey also showed that while some firms focused on developing their stocks in hopes of heightened sales, only a few others actually lowered stocks in fear of anticipating low sales.

With more and more businesses getting ahead of their past debts, the largest job gain seen in three years was led by private sector hiring. As Americans witness that economic growth is not dead, it will be interesting to see whether that pace of business improvement continues and what other potential businesses will join in on the race.

Goldman Sachs Faces Fraud Charges for Subprime Mortgage Bonds

Envoca — Fri, 16 Apr 2010 17:11:27 +0000

As one of the most widely recognized global investment banking and securities firm, Goldman Sachs is facing accusations of fraud by the Securities and Exchange Commission (SEC). The LA Times reports that the civil charges filed against Goldman Sachs have to do with an intricate mortgage-backed security the company created. The establishment of these collateralized debt obligations was done before our nation’s economic whirlpool.

In referring to Goldman Sachs’ product as “new and complex,” an SEC official also stated that the trickery and divergence of the product are “old and simple.” In making subprime mortgage bonds that potentially hold these fraudulent qualities, the SEC is accusing Goldman Sachs as well as one of the bank’s vice presidents with contributing to significant financial losses and our current credit disaster. This alone has alarmed investors across Wall Street, even though the investment bank has been scrutinized for financial transactions it took part in before the crisis went into full-swing. In addition, in coming out of the financial crisis more resilient than it was before, the potential consequences ahead of Goldman Sachs could be quite hefty.

While subprime loans can relate to mortgages, they can also include auto loans, personal lines of credit, and credit cards. The SEC suspects that Goldman Sachs failed to entirely notify investors about the specifics of the collateralized debt obligations, which resulted in a lot of money lost. In formulating and carrying out the charges against Goldman Sachs, the securities in question are noted to have been established for Paulson & Co. which is a hedge fund that brought in billions from gaming in opposition of the subprime mortgage market.

While subprime lending has its benefits, there are several cloudy areas that can lead borrowers to a point of no return. While the Goldman Sachs investigation relates to a broad scope of individuals and businesses affected, on a smaller but similar scale, victims of predatory lending cannot meet the terms of their high interest loans, which are sometimes deliberately made by subprime lenders. Investment loss attorneys in Pennsylvania and throughout the nation work to reverse the wrongdoing of stockbrokers and lenders for those victimized by predatory lending, investment loss and unfair lending practices.

Federal Prosecutors Halt Starwood-Hilton Corporate Espionage Lawsuit

Admin2 — Tue, 13 Apr 2010 14:00:04 +0000

In an interesting turn in one of this year’s highest profile business law cases, federal prosecutors have asked the court to stop Starwood’s corporate espionage suit filed against Hilton as the lawsuit may compromise a criminal investigation currently underway.

According to USA Today, Starwood first sued Hilton in April 2009 alleging that the luxury hotel chain had taken electronic and physical copies of confidential documents and illicitly used the information to develop a competitor chain to the W Hotels brand, the luxury lifestyle/boutique hotel brand of Starwood. Later in January 2010, Starwood filed an amended complaint that further claimed that CEO Christopher Nassetta and other top Hilton executives were aware of Hilton’s use of confidential Starwood documentation (though Nassetta was not named as a party in the complaint).

The U.S .Attorney’s Office launched its investigation shortly after Starwood filed its complaint. Most recently, the federal government filed a 14-page document stating that prosecutors were looking into possible charges of computer fraud, theft of trade secrets, conspiracy and interstate transportation of stolen goods. The federal inquiry focuses on Ross Klein and Amar Lalvani, two Hilton executives who previously worked for Starwood.

The federal filing seeks to stay discovery in Starwood’s civil case until the criminal investigation is resolved. FBI agents and government prosecutors are interviewing individuals possibly involved with the matter. Previously, Starwood was utilizing the discovery process in its suit in an attempt to uncover what had transpired between witnesses and the U.S. Attorney’s Office.

Upon release of this story, Hilton publicly confirmed that it was involved in a government investigation, stating that it would “fully cooperate” with the federal government and that they supported its decision to stay discovery in the civil matter initiated by Starwood. Starwood declined to comment when contacted by USA Today.

Board of Directors of General Growth Sued by Shareholder

Admin2 — Fri, 09 Apr 2010 16:00:49 +0000

A shareholder is suing the board of directors of General Growth Properties Inc., a Chicago-based publicly traded real estate investment trust, for alleged breach of fiduciary duty. According to BusinessWeek, Chairman John Bucksbaum, along with the six other members of the board, is being brought to court for rejecting a $10 billion buyout offer from Simon Property Group Inc. General Growth which is now bankrupt.

Simon Properties, a rival mall operator from Indianapolis, publically offered to buy the beleaguered Chicago outfit for about $9 a share plus $6 in cash, a deal which would amount to over $10 billion. However, the board of General Growth rejected the offer saying that the price was too low and instead opted to wait for other potential buyers to make a bid.

The lawsuit, brought by James Young on behalf of the stockholders of General Growth, seeks to bar the company from entering into any contract that harms the shareholders or the company itself. Furthermore, the suit would stop the board from entering into a deal that would make it costly or difficult for another purchaser to acquire the company.

Blackstone Group LP, which is the world’s largest private equity firm, is rumored to be in discussions with Simon in order to join it in its bid. This news caused General Growth’s shares to rise 5 cents. However, further details regarding the Blackstone-Simon deal have not yet been made public as the talks are still in their preliminary phases.

According to Seeking Alpha, Simon Property is the largest mall operator in the U.S. while General Growth is the second largest and most successful operator in the country. However, General Growth has been the only real estate investment trust to fail, likely due to the recent downturn in the real estate market.

Fraud – The Financial Injury

Admin2 — Tue, 06 Apr 2010 16:00:03 +0000

A sequel to the hit movie Wall Street is due to be released in a few months. The sequel, called Money Never Sleeps, stars Michael Douglas as the infamous Gordon Gekko who was sent to prison for insider trading. Although the plot seems a bit disappointing, it will be worth it to watch Gekko resurrect his greedy persona. Insider trading, or stock fraud, is a financial injury that can be just as devastating as a physical injury. Imagine trusting someone with your life savings only to have your funds misappropriated. Known as a type of “white collar crime,” fraud can occur in insurance, real estate, healthcare, government and credit card areas.

Since fraud is a felony, the perpetrator will be prosecuted in federal court. Punishments for fraud can include fines and imprisonment. The victim can also initiate a lawsuit in civil court and try to recover the financial loss.

What can you do if you’re the victim of fraud? An investment loss lawyer can evaluate your case and advise you of the best way to gain restitution for your financial loss. The fraud laws in your state will help determine how long you have to file a lawsuit and what damages can be awarded. If the perpetrator is found guilty, his or her assets will be sold to pay the damages.

One of the most publicized cases of fraud involves NY financier Bernard Madoff who was charged and sentenced to 150 years in prison for swindling customers out of millions of dollars. The Securities and Exchange Commission (SEC), the federal agency that investigates securities fraud, is trying to recoup some of the money investors lost in Madoff’s Ponzi scheme.

Financial injury is extremely difficult to overcome, especially in this economy. Beware of the many Gordon Gekkos out there.