San Diego judge allows transfer of pension overcharging case to L.A. despite city’s objection

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A lawsuit filed by the San Diego city attorney against its pension system will be transferred to another venue, according to a ruling by San Diego Superior Court Judge Joan Lewis.

The transfer was sought by the San Diego City Employees Retirement System and local labor unions because they felt that the recent damaging stories in the local press about alleged abuses in the pension system would prevent them from getting a fair trial.

The city tried to stop the transfer saying the request was not made timely, and only for the purpose of delaying the trial. The case was originally scheduled to begin on April 29 in San Diego.

City Attorney Jan Goldsmith brought the lawsuit last May, based on an interpretation of the city charter requiring that workers and the city contribute “substantially equal” amounts into the employees pension plan.

The lawsuit claims that the city has been overcharged by tens of millions of dollars each year by pension system officials.

“In light of the constant media attention that San Diego’s pension funding has received, we believe it is prudent to change venues to ensure a fair trial and we’re very pleased that Judge Lewis agreed with our position,” pension official Mark Hovey said.

Goldsmith told the San Diego Union-Tribune that “The labor unions and their supporters see this case as such a threat that they pulled out all the stops to delay, confuse and bury it — anything to avoid a decision on the merits.”

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Madoff Trustee demands $300 million from N.Y. Mets owners

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The owners of the Mets turned a blind eye to Bernard Madoff’s massive fraud, reaping $300 million in false profits and using a large chunk to run the team, according to a lawsuit unsealed Friday. The lawsuit claims the owners were so dependent on the disgraced financier’s too-good-to-be-true returns that it “faced a severe and immediate liquidity crisis” when Madoff’s crimes were revealed in 2009.

The searing allegations were made by Irving Picard, the trustee appointed to recover funds for investors burned by Madoff’s scheme. The suit filed by Picard in federal bankruptcy court in Manhattan names Sterling Equities, along with its partners and family members, including Mets owner Fred Wilpon, team president Saul Katz and chief operating Jeff Wilpon, the owner’s son. Picard said Sterling withdrew over $94 million in fictitious profits from Mets accounts with Madoff.

“Given Sterling’s dependency on Madoff, it comes as no surprise that the partners willfully turned a blind eye to every red flag of fraud before them,” Fernando A. Bohorquez, Jr., a lawyer representing Picard, said Friday.

The suit had been filed under seal in December while the parties tried to work out a settlement. But lawyers told a judge this week that talks had collapsed and consented to having the complaint made public. Its opening salvo: “There are thousands of victims of Madoff’s massive Ponzi scheme. But Saul Katz is not one of them. Neither is Fred Wilpon.”

The complaint alleges the partnership “received approximately $300 million in fictitious profits” from hundreds of accounts opened with Madoff’s firm. Of that, it says, $90 million of “other people’s money” were withdrawn to cover day-to-day operations of the Mets.

Wilpon and Katz fired back Friday with a statement calling the suit “an outrageous strong-arm effort to force a settlement by threatening to ruin our reputations and businesses we built for over 50 years.”

The pair called the accusations “abusive, unfair and untrue,” insisting they were victims of the fraud. “We should not be made victims twice over — the first time by Madoff and again by the trustee,”  they wrote.

The lawsuit said Wilpon and Katz had meetings with Madoff in his office at least once a year, a privilege few investors enjoyed, and Katz at times spoke directly with Madoff at least once a day. It also said Wilpon and Katz maintained investments in Madoff accounts, even though Ivy Asset Management expressed concern in 2002 and the Sterling Stamos hedge fund warned repeatedly Madoff was “too good to be true.” The suit said a Sterling consultant advised Katz something was amiss in 2003, and Merrill Lynch warned them about Madoff as early as 2007.

The suit alleged that by December 2008, Sterling had referred approximately 178 “outsider” investor accounts to Madoff. It also said that when Wilpon and his family also bought Nelson Doubleday’s 50 percent ownership of the Mets in 2002, Madoff declined a chance to invest in the team that he was offered by Sterling.

The lawsuit said cash from Madoff accounts, including fictitious profits, was used for team payroll, players’ deferred compensation and stadium operations. The suit has cast a cloud over the Mets ownership, which has said it’s exploring a partial sale of the team. But Wilpon and Katz denied Friday that the operation was ever dependent on Madoff.

“That is complete nonsense,” they said. “We have good, sound businesses that were successful years before we invested with Madoff, including both real estate and the New York Mets.”

Madoff, 72, is serving a 150-year sentence in a federal prison in North Carolina after admitting that he ran his scheme for at least two decades, using his investment advisory service to cheat individuals, charities, celebrities and institutional investors.

Losses are estimated at around $20 billion, making it the biggest investment fraud in U.S. history.

The lawsuit describes the Sterling Partners as “a team of sophisticated professionals who built a business empire spanning four major industries, including real estate, professional baseball and sports media, private equity and hedge funds.”

It says Sterling Partners “willfully disregarded any criticisms of Madoff and simply buried their heads in the sand” during a nearly quarter-century relationship in which it supported its substantial business empire with Madoff money and reaped the benefits of bogus profits.

The firm was “simply in too deep … to do anything but ignore the gathering clouds,” the lawsuit says. “In the face of the parade of red flags, the Sterling Partners chose to do nothing.”

Numerous financial industry professionals over the years warned Sterling about Madoff and speculated he was operating a fraud, including one Sterling consultant who advised Katz in 2003 that he “couldn’t make Bernie’s math work and something wasn’t right,” the court papers say.

The lawsuit says Sterling was on notice as early as 1991 that Madoff’s firm was audited by a three-person operation in Rockland County that consisted of a certified public accountant, a semiretired accountant and an assistant. In 1996, it says, multiple banks refused to serve as custodian of Sterling’s 401K plan because of concerns about Madoff’s lack of transparency and inability to provide daily account balance information.

At one point after several financial news publications raised questions about the Madoff business in May 2001, Sterling considering getting fraud insurance that would have included a Ponzi scheme but Sterling ultimately rejected the insurance because coverage limits meant most of their money was uninsurable, according to the court papers.

The lawsuit said Sterling’s Madoff accounts produced positive returns during the Black Monday stock market crash of 1987, the bursting of the dot-com bubble in 2000, the terrorist attacks of Sept. 11, 2001, and the recession and housing crisis of 2008.

“Remarkably, Sterling’s [Madoff] investments were effectively immune from any number of market catastrophes, enjoying steady rates of return even during events that otherwise devastated financial markets, ” the lawsuit says.

The Associated Press

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Rep. Dennis Kucinich sues cafeteria over olive mishap

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Rep. Dennis Kucinich has filed a lawsuit over a lunch-time incident, in which he ate a pita wrap sandwich in a House of Representatives cafeteria, which contained non-pitted olives. He is suing the four companies involved in running the cafeteria in the Longworth House Office Building for a total of $150,000.

Rep. Dennis Kucinich is suing four companies involved in running a congressional cafeteria, over an accident involving an olive.

The court documents say that Kucinich ordered the vegetarian sandwich wrap “on or about” April 17, 2008 that was advertised as containing “pitted olives.” After biting into it, he realized that it “contained dangerous substances, namely an olive pit.”

After consuming the sandwich, Kucinich incurred “serious and permanent dental and oral injuries” which required “multiple surgical and dental procedures.”

The lawsuit was filed on Jan. 3, and claims that the congressman is entitled to damages for future dental and medical expenses and to compensate him for pain, suffering and loss of enjoyment. He also accuses the four firms of breach of implied warranty.

The former mayor of Cleveland, Kucinich has represented Ohio’s 10th district in the House for eight terms.

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Arizona taxpayers asked to pay $126 million for misconduct of elected officials and county employees

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A legal free-for-all has broken out in Maricopa County, the fourth largest county in the U.S. The fight features a cast of characters, including elected politicians, judges and government officials who have been at odds for years, and now want damages exceeding $100 million from Arizona taxpayers.

Sheriff Joe Arpaio, called America's Toughest Sheriff, is at the center of all the lawsuits, yet he is the only one not suing anyone. Critics hate him, fans love him.

The latest volley in the war, called a notice of claim, an advance notice of a lawsuit, was filed by former Maricopa County Attorney Andrew Thomas and Sheriff’s Chief Deputy David Hendershott. The pair are asking for $37.5 million in damages they say they suffered during years of abuse by the Board of Supervisors and others.

Meanwhile, Thomas’ former Deputy County attorney Lisa Aubuchon has amended an earlier claim she filed for $10 million in damages, and is now asking for $22.5 million.

The joint claim, totaling $60 million, was filed on Monday against former County Attorney Rick Romley and his employees and representatives, and the Maricopa Board of Supervisors. The three claim that county employees participated in theft, perjury, fraud, retaliation, defamation, racketeering violations, misuse of power and influence and abuse of process.

The claimants, plus Sheriff Joe Arpaio, are the subject of an investigation by the U.S. Justice Department and a federal grand jury, reviewing allegations of abuse of power for instituting corruption probes against the Board of Supervisors, their lawyers and Superior Court judges over a course of two years.

Three of those judges, and two county officials, filed their own lawsuits against Arpaio and Thomas on Nov. 23, claiming that as a result of the investigations, they suffered mental anguish, ruined reputations, physical maladies and a loss of consortium. The group is asking Maricopa County taxpayers for $56 million in damages.

That lawsuit was filed in Maricopa County Superior Court by plaintiffs Judge Gary Donahoe, former judges Barbara Mundell and Anna Baca, Deputy County Manager Sandi Wilson, and Susan Schuermann, executive assistant to Supervisor Don Stapley.

Attorney Michael Manning, who is representing three of the plaintiffs, told the Arizona Republic News that “Reputations are so fragile. And, each of these clients suffered a significant negative impact to their reputations. In any promotion, transfer, or honor that is applied for, each will now be obliged to report that he/she was a target of a criminal conspiracy investigation. Even though the investigation was utterly meritless and vindictive, that disclosure will be the end to later opportunities in life for all three of these clients.”

The Arizona Republic News summarized the lawsuits as follows:

-Deputy County Manager Sandi Wilson claims Arpaio and Thomas targeted her after she recommended budget cuts to their agencies. She alleges Thomas and Aubuchon continued to defame and harass her even after they left office. She had offered to settle for written apologies or $2 million.

-Gary Donahoe alleges Thomas and Hendershott filed a criminal complaint against him to create a conflict of interest that would force him off of cases involving other legal battles between Thomas, Arpaio and other county officials. Donahoe’s complaint alleges their investigation into the county’s court tower project “was simply the Trojan Horse for Arpaio and Thomas’s assault on their political enemies. The only ‘crime’ committed by Judge Donahoe was to issue a ruling adverse to Arpaio and Thomas. Among other allegations, Donahoe claims Arpaio and Thomas ignored a grand jury decision to kill the case against Donahoe and continued to publicly portray the judge as the subject of a criminal investigation and chose a man who allegedly threatened to kill the judge as the process server designated to deliver the complaint to the judge. Donahoe had offered to settle for $4.75 million.

-Former judges Barbara Mundell and Anna Baca allege Arpaio and Thomas named them in a “baseless” civil racketeering lawsuit to “intimidate, harass, discredit and humiliate” them. They also claim Arpaio and Thomas intentionally tarnished their reputations and character through press releases, TV interviews and internet postings. Each had offered to settle for $4.75 million.

-Stapley’s assistant, Susan Schuermann, also filed a lawsuit alleging that prosecutors and investigators tapped her phones, followed her, sent sheriff’s deputies to patrol her street and publicly denigrated Schuermann to intimidate her into cooperating with their criminal investigation into Stapley. Hendershott also threatened to put Schuermann under criminal investigation if she failed to help, her lawsuit claims. She had offered to settle for $1.75 million.

On Dec. 28, County Supervisor Don Stapley also filed his own lawsuit against the county, alleging that Arpaio and Thomas wrongfully investigated him on civil and criminal charges. Although the lawsuit asked for unspecified damages, his earlier notice of claim asked for $10 million. His attorney, Merwin Grant, said Stapley had been “significantly damaged” by the investigations and that the lawsuit was necessary “to clear his name, to attempt to mitigate damages.”

All totaled, the various claims being pursued by officials amount to $126 million, and if paid, would come from the pockets of taxpayers.

County Manager David Smith says he is confident that a resolution to all the legal issues will be found. He had hoped to hire noted mediator Kenneth Feinberg, who handled the distribution of funds to 9/11 victims, until he was appointed by President Obama to head up the claims resolution process for the BP oil spill.

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Detroit School Board member “bugged” confidential legal settlement meeting

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As though Detroit’s public school system doesn’t have enough issues to deal with, apparently at least one of its school board members is trying to secretly sabotage its efforts to reach a legal settlement with embattled Emergency Financial Manager Robert Bobb.

In happier times: Detroit School Board President Anthony Adams and Emergency Financial Manager Robert Bobb.

The espionage was detailed in a memo sent by school board president Anthony Adams to all the board members, saying that during a “closed door” meeting to confidentially discuss a settlement, at least one board member had their cell phone turned on to send the 2-hour discussion to “outside community participants.”

The memo said in part “Such conduct is not to be tolerated. We need to do things in private.  To intrude on our process that way shows a tremendous level of disrespect.” The memo did not contain the name of the offending board member.

One board member, Dr. Carla Scott said “If it’s true, they should be sanctioned. I have no idea why someone would do something so inappropriate, so juvenile and unprofessional. I hope it’s not true,” she said.

The settlement with Bobb follows a ruling in December by Wayne County Circuit Court Judge Wendy Baxter, in which she said that Bobb overstepped his authority by making academic decisions that should have been made by the school board. The decision came as the result of a year-long civil lawsuit brought by the school board against Bobb.

Bobb was appointed by Democratic Gov. Jennifer Granholm in March 2009 to deal with the district’s ongoing financial crisis. This year, the school system is expected to have a budget deficit of over $325 million.

Bobb was given a one-year contract that was extended through March 2011.

The Detroit News

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San Diego phone operator sued for long-distance charges of $50 per minute

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BBG Communications, a privately owned operator of public telephones located in airports, rail stations and cruise ship terminals around the world, has been sued in a class action complaint, alleging the company charges grossly excessive fees to customers using credit cards on its pay telephones.

The lawsuit, seeking class-action status, was filed on behalf of two Northern California men, according to an article in the San Diego Union-Tribune. The lawyer who filed the lawsuit, Alan Mansfield, said that the company charges fees that are unconscionable when using a credit card, despite listing fees for about $1 or less per minute when using coins.

One of the men said that he was charged $54.33 for a one-minute call from a BBG payphone while in Germany, using his credit card. The other claimed that he made two calls totaling seven minutes and was charged $150 by the company.

The lawsuit alleges that the company advertises low rates for customers that use cash, but does not list rates for using credit or debit cards. Customers expect similar rates, and then discover the enormous charges later when they receive their bank statement or credit card bill. When customers complain, BBG typically refunds only 30 to 40 percent of the charges.

The company operates about 350,000 phones around the world, including the iconic red phone booths in London. It provides phone services in North and South America, Europe, Japan, Israel and the Caribbean, and sells 300 million minutes of calls each month.

The company is owned by the Galicot family of Tijuana, Mexico, and is run by Gregory Galicot.

San Diego Union-Tribune

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Where’s the beef: Mother sues McDonald’s over Happy Meals-can’t stand up to demanding children

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On the heels of the San Francisco County Board of Supervisors regulating the manner in which the fast-food giant serves Happy Meals in its county, a new attack has been launched by a group claiming that the tiny toys served up with the meals amounts to deceptive advertising.

The lawsuit from the group, the Oakbrook, Illinois-based Center for Science in Public Interest filed the lawsuit in the sympathetic venue of San Francisco County’s Superior Court. The complaint alleges unfair competition and false advertising.

According to the complaint, “McDonald’s exploits very young California children and harms their health by advertising unhealthy Happy Meals with toys directly to them.” Additionally, “children 8 years old and younger do not have the cognitive skills and the developmental maturity to understand the persuasive intent of marketing and advertising.”

CSPI director Stephen Gardner said that his organization approached McDonalds several times out of court to change the Happy Meals, but that the company had “stonewalled them.” “We’re not trying to force McDonald’s to sell apples and sprouts,” Gardner said. “We’re just trying to stop McDonalds from marketing to 3-year-olds.”

The plaintiff in the lawsuit Monet Parham, a Sacramento mother of two, claimed she was bringing the lawsuit because of repeated requests by her two daughters, 6 and 2, for trips to McDonald’s to get the Happy Meals.

“I don’t think it’s OK to entice children with Happy Meals with the promise of a toy,” she said, adding that she tries to hold her daughters, 6 and 2, to monthly visits. However, she said the requests increased this summer, thanks to the popularity of “Shrek Forever After” and the idea of collecting all of the toys, which would require weekly visits.

“Needless to say, my answer was ‘no,’ ” she said. “And as usual, pouting ensued and a little bit of a disagreement between us. This doesn’t stop with one request. It’s truly a litany of requests.”

Hmmm.

Chicago Breaking Business

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