Bank Settles Shareholder Claim for $5 Mil.

A northeastern Pennsylvania regional bank, which was accused of providing dubious loans to board members—among them Michael T. Conahan, the former Luzerne County Court of Common Pleas president judge who is now incarcerated after his conviction on charges stemming from the "kids for cash" scandal—has agreed to settle a shareholder derivative claim for $5 million.

NFL Concussion Class-Action Lawsuit Settles for $765 Mil.

The National Football League has settled the concussion lawsuit brought by former players for $765 million, according to an order from the federal judge overseeing the case.

Business Briefing | Company News: UBS Settles Suit in Lehman Brothers Bankruptcy

Lots of great songs aren’t “about” anything, writes Adam Schlesinger of the band Fountains of Wayne.

China tries a market fix for its dirty air.

Mead Johnson Settles With China Over Price-Fixing

Mead Johnson Nutrition said on Tuesday it would pay about $33 million in connection with a Chinese investigation into possible price-fixing and anticompetitive practices by foreign makers of baby formula.

Mead Johnson, the maker of Enfamil formula, said that as a result of its antitrust review, China’s National Development and Reform Commission had assessed administrative penalties against Mead Johnson and a number of other milk formula companies doing business in China.

Foreign infant formula is highly coveted in China, where public trust was damaged by a 2008 scandal in which six infants died and thousands of others were sickened after drinking milk tainted with the toxic industrial compound melamine. Foreign brands now account for about half of total sales.

Mead Johnson said the payment, which resolves the commission’s review, would reduce its full-year earnings by about 12 cents a share, but it reiterated its 2013 earnings forecast for profit, excluding one-time items, of $3.22 to $3.30 a share.

The company said in recent weeks that it was being investigated, along with Danone, Nestlé, Abbott Laboratories and Biostime International Holdings, by the Chinese commission, an economic planning agency, for possible antitrust violations including price-fixing.

As a result, Mead Johnson and others cut prices on their baby formulas.

Representatives from Danone, Nestlé and Abbott Laboratories were not immediately available for comment.

Biostime, which imports most of its products, said on Tuesday that its shares had been suspended pending an announcement related to an investigation by China’s top economic planning agency. The company said previously that a unit based in Guangzhou, a city in southern China, was being investigated by the commission over possible price-fixing.

In a statement to the Hong Kong stock exchange in late July, Biostime said it planned to lower prices of infant formula products by 5 to 10 percent.

Eagles' Peters Settles for $2 Mil. in Crutch Injury Case

Philadelphia Eagles left tackle Jason Peters has agreed to settle a lawsuit for nearly $2 million against the manufacturer of a crutch-like device that broke while he was using it, causing him further injury and time away from the team.

DealBook: Bank in Madoff Suit Settles With Some Plaintiffs

Douglas Healey for The New York TimesWestport National Bank was the custodial bank for Bernard Madoff accounts.Susan AntillaFaye Albert, and her lawyer, Steve Gard, had sued Westport National Bank.

6:19 p.m. | Updated

Westport National Bank and its parent company, Connecticut Community Bank, were not liable for the losses of investors in Bernard Madoff’s vast Ponzi scheme in its role as a custodial bank, a jury found on Wednesday. Separately, the bank agreed to pay $7.5 million to 240 investors in a related case, a lawyer for the bank said.

A federal jury in Hartford had finished hearing eight days of evidence last month in a case before Judge Vanessa L. Bryant of the United States District Court for the District of Connecticut. The case had consolidated three similar lawsuits against the bank. Two of those cases settled before the jury began its deliberations.

After the other cases settled, the jury did evaluate the bank’s custodial duties in a case brought by two Florida investors, but sent a mixed message.

After 14 hours of deliberation, the jury said that the bank was not a fiduciary, and thus owed no fiduciary duty to two elderly Florida investors, Audrey Short and Faye Albert.

The jury ruled that the bank breached its custodian agreements when it calculated its fees based on the Madoff firm’s reports instead of on the actual assets it held. It also said that the two plaintiffs had proved that the bank breached its agreements when it failed to issue accurate annual statements and failed to audit or verify the existence and value of the assets.

But the six jurors determined that neither plaintiff had proved that she suffered any economic loss as a result of the actions.

“They found we failed to maintain accurate records, but they found that nothing the bank did caused any harm,” Tracy A. Miner, one of the bank’s lawyers, said in a telephone interview. Ms. Miner said that the bank’s liabilities involving the accounts that were settled could have reached $70 million to $80 million.

Steve Gard, a lawyer for Mrs. Short and Mrs. Albert, said that he planned to file a motion within two weeks asking for a judgment in the investors’ favor because the jurors findings “are inconsistent.”

Mr. Gard said that the jurors determined that his clients had not suffered a loss as a result of the bank’s inadequate recordkeeping before getting a chance to hear all the evidence.

During the trial, the bank stressed that its contracts with the plaintiffs only obligated it to perform ministerial duties. Lawyers for the bank also made much of the fact that financial regulators, including the Securities and Exchange Commission, had not been able to catch Mr. Madoff, so it would be unrealistic to expect a small Connecticut bank to be able to do so.

For their part, the plaintiffs emphasized that there were cautious investors who stayed away from Mr. Madoff’s firm because of the lack of transparency in his operation.

The case had been watched for its implications on the duties of custodial banks. Investors sometimes assume that a custodian actually takes custody of their assets, but the bank’s obligations can vary widely depending upon how its contract is worded.

Custodial relationships become problematic “when there is ambiguity about the bank’s duties and the customer expects more than the bank thought it had agreed to” said Kathy Bazoian Phelps, a Los Angeles-based lawyer and co-author of “The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes.”

The interpretation of contractual obligations was “exactly where the trouble lies” in the Connecticut Community Bank case, she said.

Disputes over the obligations of custodians will only get more frequent and more heated, said Edward Siedle, a former S.E.C. lawyer who investigates pension fund abuses.

Investors are increasingly setting up so-called self-directed I.R.A.’s that invest in hedge funds and real estate, Mr. Siedle said. Each of those accounts must be kept with a custodian, which may have no obligation to do more than keep records that it never verifies.

“The risks are getting greater than ever,” he said.

Google Settles Suit, Clearing Way for Stock Split

SAN FRANCISCO — Google has resolved a shareholder lawsuit blocking a long-delayed stock split, clearing the way for the Internet search leader to issue a new class of non-voting shares later this year.

The settlement announced Monday came on the eve of a scheduled Delaware chancery court trial that threatened to cast an unflattering light on Google co-founders Larry Page and Sergey Brin.

The class-action by the Brockton Retirement Board in Massachusetts and another Google shareholder, Philip Skidmore, alleged that Page and Brin engineered the stock split in a way that unfairly benefits them while shortchanging the rest of the company's shareholders.

Google denied the allegations and maintained that the proposed stock split announced 14 months ago would benefit shareholders by ensuring that Page and Brin would preserve the power that has enabled them to make the same kinds of bold bets on technology that has helped increase the company's market value by more than $260 billion during the past nine years.

The split calls for a new class of "C'' stock with no voting power to be issued for each share of an existing category of "A'' voting stock. The structure is designed to ensure that Page and Brin retain control over the company, even though they only currently own about 15 percent of Google's outstanding stock, combined.

Page, Google's CEO, and Brin, an executive who oversees special projects in the company's secret X Lab, hold 56 percent of Google's voting power through a "B'' class of stock that gives them 10 votes per share. By creating a new class of non-voting shares, Google will be able to keep rewarding other employees with more stock and financing potential acquisitions of stock without undermining the voting power of Page and Brin.

The co-founders began pushing for the stock split three years ago, according to court and regulatory documents. Google shareholders approved the split a year ago, but the lawsuit had prevented the company from issuing the new shares.

The settlement still requires final court approval after shareholders have an opportunity to file any further objections. That means it will be at least several more weeks before the split can occur.

The legal truce will require Google Inc. to compensate owners of the new class of if stock if it's worth less than the existing class of stock after one year of trading. If the Class C stock is one percent to five percent below the price of the Class A shares, investors will receive a fraction of the difference in cash or additional Google stock. The maximum payments will be made if Class C stock lags the Class A price by five percent or more.

Google's Class A shares rose $11.21 Monday to close at $886.25. Based on that price, the Class C stock would have to be trading at $841.94 or lower to receive the maximum payment outlined in the settlement. In this scenario, the Class C stockholders would receive $44.31 per share.

If the split takes place, the trading price of Google's stock will probably fall dramatically to reflect a nearly doubling in outstanding shares. Google is expected to issue more than 271 million C shares, based on how many Class A shares were outstanding as of April 18.

Google, which is based in Mountain View, Calif., is betting there won't be a substantial gap between the trading prices of the Class A and Class C shares because investors backing the company have always known Page and Brin had the power to trump all other shareholders. That arrangement seems to have worked out well, given that Google's A shares have risen 10-fold from their initial public offering price of $85.

Another provision of the settlement requires Google's board to do a special review assessing how Class A shareholders will be affected if a future company acquisition is financed with more than 10 million shares of Class C stock.

Employment Law: DOJ Settles Its First ADA Hepatitis B Bias Claim

On March 5, the U.S. Department of Justice reached a settlement with the University of Medicine and Dentistry of New Jersey under the Americans with Disabilities Act. The settlement agreement resolved allegations that UMDNJ rejected applicants to its medical school and school of osteopathic medicine because the applicants have hepatitis B.

Former Allegheny jail inmate settles lawsuit over loss of hand

GREENSBURG, Pa. (AP) - A former Allegheny County Jail inmate has settled his federal lawsuit claiming he lost his right hand in August 2009 because he was handcuffed to a gurney while he was being treated at UPMC Mercy for diabetic ketoacidosis, according to a federal judge?s order issued Monday.

DealBook: Fund Manager Settles Case in Dell Insider Trading Ring

Paul Sakuma/Associated PressDell’s offices in Santa Clara, Calif.

In August 2008, in the midst of the financial crisis, a large bet that the shares of Dell would drop proved highly lucrative for a tight-knit group of traders. It has also proved to be bountiful for the government in its campaign to root out insider trading on Wall Street.

On Friday, Victor Dosti, a former portfolio manager at the Whittier Trust Company, settled a civil action brought by federal securities regulators who accused him of illegally trading Dell shares. He is the ninth person charged by the government related to the Dell trade.

Mr. Dosti and Whittier, a money manager based in South Pasadena, Calif., agreed to pay about $1.7 million to resolve the lawsuit, which was filed by the Securities and Exchange Commission in Federal District Court in Manhattan. The S.E.C. said that Whittier earned profits and avoided losses of about $725,000 by trading on illicit tips about Dell as well as the technology companies Nvidia and Wind River Systems.

The secret information was funneled to Mr. Dosti by Daniel Kuo, a former analyst at Whittier who pleaded guilty last year to criminal charges that he was part of the insider-trading scheme of traders, analysts and corporate insiders who earned about $70 million in profits by trading on secret information that came from inside Dell and other companies.

“Time and again, Dosti received what he knew was inside information from Kuo and traded on it to generate illicit gains,” Sanjay Wadhwa, senior associate director of the S.E.C.’s regional office in New York, said in a statement.

Gary Lincenberg, a lawyer for Mr. Dosti, declined to comment. Robert Anello, a lawyer for Whittier, said that his client was glad to have the matter behind it and that “the conduct engaged in by two former employees is completely contrary to the core values of this organization.”

Two of the nine individuals tied to the Dell insider-trading ring are former employees of SAC Capital Advisors, the giant hedge fund that is at the center of the government’s investigation. Michael Steinberg, a longtime SAC trader, was charged as part of the ring that illegally traded Dell and Nvidia. His name first surfaced last fall, when Jon Horvath, a former SAC analyst, pleaded guilty to insider trading in the two technology stocks and said he shared the information with Mr. Steinberg.

Mr. Steinberg has pleaded not guilty and is scheduled to stand trial on Nov. 18.

Whittier fired Mr. Dosti, 49, last January after federal prosecutors first brought charges related to the Dell and Nvidia trades. Mr. Dosti, an Albanian immigrant, received an M.B.A. from the University of Chicago and worked at Northern Trust and Citigroup before joining Whittier about a decade ago.

DealBook: Capital One Settles Accusations It Understated Loan Losses

Brendan McDermid/ReutersA Capital One banking center in New York. Federal regulators said the company understates its losses on auto loans in filings.

Federal regulators on Wednesday accused Capital One and two of its executives of understating millions of dollars in auto loan losses suffered during the financial crisis.

The case, which the Securities and Exchange Commission agreed to settle with Capital One and the executives, illustrated a common financial misdeed during the crisis. As losses mounted in 2007 and 2008, some Wall Street firms covered up the woes from the public, prompting a wave of federal actions against Countrywide Financial and other lending giants.

In the case of Capital One’s auto-lending business, according to the S.E.C., the bank “materially understated” its loan loss expenses and “failed to maintain effective internal controls.” The S.E.C. contended that Peter A. Schnall, who was Capital One’s chief risk officer at the time, and David A. LaGassa, a lower-level executive, failed to prevent the improper statements.

“Accurate financial reporting is a fundamental obligation for any public company, particularly a bank’s accounting for its provision for loan losses during a time of severe financial distress,” George Canellos, the co-chief of the S.E.C.’s enforcement unit, said in a statement. “Capital One failed in this responsibility.”

But the S.E.C. could face questions over whether its penalties fit the crime. Capital One, one of the nation’s biggest banks, paid $3.5 million to settle the case, a minuscule amount for a company of its size. And like most banks accused of wrongdoing during the 2008 crisis, Capital One was not required to admit or deny wrongdoing.

“The settlement does not require a restatement of Capital One’s financial results,” said a bank spokeswoman, Tatiana Stead. She added that the deal “will not affect any current or future business activities by Capital One.”

The two executives also emerged relatively unscathed. Mr. Schnall agreed to pay an $85,000 penalty, and Mr. LaGassa settled for $50,000. Neither is barred from the securities industry. They are still employed by Capital One, though in different roles.

“The company continues to have confidence in Mr. Schnall and Mr. LaGassa and we believe that they can perform in their current roles with the company,” Ms. Stead said.

Lawyers for both men did not respond to requests for comment.

The S.E.C.’s case stems from early 2007, when the subprime lending market was beginning to collapse. At Capital One’s subprime auto-lending arm, the losses outpaced the bank’s initial forecast.

The bank scrambled to react. Mr. LaGassa organized a “swat team” to diagnose the losses and provided almost daily e-mail updates to Capital One’s senior executives. In an e-mail cited by the S.E.C., Mr. LaGassa warned he was “not optimistic that we are going to suddenly see a slowing in losses.”

Ultimately, an internal “loss forecasting tool” traced the mounting problems to “exogenous” factors — external problems like the souring economy.

But the bank, according to the S.E.C., looked the other way. For example, according to the S.E.C., Capital One failed to include any “exogenous-driven losses” in its assessment of the second quarter in 2007.

Capital One, the S.E.C. said in the order, “gave insufficient weight to the evidence available at the time.”

The bank’s actions, the S.E.C. said, caused the company to “materially” understate its loan loss expense in public filings. In the second quarter alone, Capital One understated the expense by up to $72 million, or about 18 percent.

“Financial institutions, especially those engaged in subprime lending practices, must have rigorous controls surrounding their process for estimating loan losses to prevent material misstatements of those expenses,” Gerald W. Hodgkins, a senior S.E.C. enforcement official, said. “The S.E.C. will not tolerate deficient controls surrounding an issuer’s financial reporting obligations, including quarterly reporting obligations.”

Ultimately, an internal “loss forecasting tool” traced the mounting problems to “exogenous” factors — external problems like the souring economy.

But the bank, according to the S.E.C., looked the other way. For example, according to the S.E.C., Capital One failed to include any “exogenous-driven losses” in its assessment of the second quarter in 2007.

Capital One, the S.E.C. said in the order, “gave insufficient weight to the evidence available at the time.”
Capital One’s actions, the S.E.C. said, caused the company to “materially” understate its loan loss expense in public filings. In the second quarter alone, Capital One low-balled the expense by up to $72 million, or about 18 percent.

“Financial institutions, especially those engaged in subprime lending practices, must have rigorous controls surrounding their process for estimating loan losses to prevent material misstatements of those expenses,” Gerald W. Hodgkins, a senior S.E.C. enforcement official said. “The S.E.C. will not tolerate deficient controls surrounding an issuer’s financial reporting obligations, including quarterly reporting obligations.”

Penn State Settles Trademark Case Against Stadium-Area Rental Company

Penn State has confidentially settled a trademark infringement action it brought in January against real-estate companies that provide rental housing to people attending the school's football games.

HTC Settles F.T.C. Charges Over Security Flaws in Devices

The Federal Trade Commission charged HTC with customizing the software on its Android- and Windows-based phones in ways that let third-party applications install software that could steal personal information, surreptitiously send text messages or enable the device’s microphone to record the user’s phone calls.

The action is the first attempt by the commission to police a manufacturer of mobile devices. As smartphones and tablets become a common way for consumers to shop, bank and chat online, personal information and privacy will need to be guarded.

HTC America, based in Bellevue, Wash., agreed to settle the civil suit with the commission by issuing software patches that close the security holes, and by creating a security program that will be monitored by an independent party for the next 20 years. The F.T.C. does not have the authority to assess fines in consumer protection cases.

“The company didn’t design its products with security in mind,” Lesley Fair, a senior lawyer in the commission’s Bureau of Consumer Protection, wrote in a blog post. “HTC didn’t test the software on its mobile devices for potential security vulnerabilities, didn’t follow commonly accepted secure coding practices and didn’t even respond when warned about the flaws in its devices.”

An HTC official said Friday that the company had already started to update its software and distribute it to users of some, but not all, of the affected phones.

“Working with our carrier partners, we have addressed the identified security vulnerabilities on the majority of devices in the U.S. released after December 2010,” Sally Julien, an HTC spokeswoman, said in a statement. “We’re working to roll out the remaining software updates now and recommend customers download them once available.”

“Privacy and security are important,” the statement added, “and we are committed to improving practices that help safeguard our customers’ devices and data.”

The trade commission charged that the security flaws resulted from HTC’s modifying the operating system software used on most of the affected phones. In the case of Android, created by Google, the system is designed to protect sensitive information and phone functions through what is known as a permission-based security model.

That requires a user, when installing an application that is not a standard part of the operating system, to be notified and to agree that the application could gain access to certain information or functions.

HTC, however, preinstalled certain apps on its phones in a way that, in addition to preventing consumers from removing them, disabled the permission-based model and allowed newly installed apps to have immediate access to personal data.

“The analogy isn’t exact,” wrote Ms. Fair of the F.T.C., “but it’s like giving a friend the combination to a safe only to find out he’s handing it over to anyone who asks.”

That security hole could, for example, let the rogue software secretly record users’ phone conversations or track their location.

Flaws in the security system could also give third-party apps access to phone numbers, contents of text messages, browsing history and information like credit card numbers and banking transactions. Those flaws also affected HTC phones that used Windows-based operating systems.

While HTC’s actions introduced numerous security vulnerabilities to its phones, a commission official said it was not clear how many users experienced illegal incursions into their phones and personal information.

The flaw in the company’s phones has been known since at least 2011. HTC acknowledged the problems at that time and developed software patches for at least some of the deficiencies that year.

But the problems were far from minor. The F.T.C. said that text-message toll fraud, in which a hacker causes a phone to send text messages to a number that charges the user for delivery of the message, “is one of the most common types of Android malware,” or malicious software.

HTC’s user manuals either said or implied that a user was protected against malware because of the permission-based security, the commission said.

The commission will collect public comments on the proposed remedies for 30 days, after which it will decide whether to formally carry out the order. If HTC subsequently violates the order’s restrictions and requirements, it faces civil penalties of up to $16,000 a violation.

Kraft Settles With Stockers for $1.75 Mil.

Kraft Foods has settled claims that it failed to properly calculate overtime brought by people who stock grocery store shelves for $1.75 million.

Media Decoder Blog: Awaiting Merger With Random House, Penguin Settles E-Book Case

Penguin, trying to ensure a clean slate before its planned merger with Random House, announced late Tuesday that it was settling a lawsuit brought by the Department of Justice over the pricing of e-books.

In a terse statement the company said, “Penguin has always maintained, and continues to maintain, that it has done nothing wrong and has no case to answer.”

Nevertheless, the company said, it was agreeing to settle because of the impending merger between Random House, a division of the German media company Bertelsmann, and Penguin, a division of the English conglomerate Pearson. That deal, in which Bertelsmann will assume 53 percent control of the new company, was announced this past October as the publishing industry begins to consolidate to try to better meet the online challenge from Amazon.

The company said in its statement, “It is also in everyone’s interests that the proposed Penguin Random House company should begin life with a clean sheet of paper.”

In April, the Justice Department filed a lawsuit accusing five major publishing houses and Apple of conspiring to fix the price of e-books. These five had moved from a wholesale pricing model that allowed retailers to charge what they wanted to a system that allowed publishers to begin setting their own e-book prices, what was known as “agency pricing.”

The publishers had been looking for a way to prevent Amazon from pricing books below their actual cost, a practice that they said would hurt the entire industry over time. But the government said that the publishers “conspired” in e-mails, in telephone conversations and at lavish dinners to keep e-book prices artificially high.

Three big publishing houses — HarperCollins, Simon & Schuster and Hachette — settled with the Justice Department, but Penguin, Macmillan and Apple decided to fight the charges, until Penguin reversed course on Tuesday.

In the terms of a settlement that a judge approved in September, the three publishers that settled agreed to end contracts with Apple and with e-book retailers that contained restrictions on their ability to set prices, and agreed not to make such restrictive contracts for the next two years.

In May, when Penguin filed its response in United States District Court in New York, it argued that it was Amazon that treated books as “widgets.” It further argued that Amazon was “predatory” and a “monopolist” and that the government’s case was based on “innuendo.”

Penguin said in its statement on Tuesday that it still believed that agency pricing was just. “Penguin continues to believe that the agency pricing model has encouraged competition among distributors of both e-books and e-book readers and, in the company’s view, continues to operate in the interest of consumers and author.” it said.

The terms of the settlement with the Justice Department were not available, but people with knowledge of the details said that they were the same as those received by the other three publishers.

This post has been revised to reflect the following correction:

Correction: December 18, 2012

Because of an editing error, an earlier version of this post carried an erroneous byline.

Marcellus driller settles with W. Pa. land owners

DARLINGTON, Pa. (AP) - A natural gas drilling company has settled federal lawsuits by western Pennsylvania landowners who contested the company's drilling leases and were, in turn, countersued by the company for permission to cut down trees sometimes inhabited by a protected bat species so the wells could be drilled.

Penn State Settles Trademark Case Against Stadium-Area Rental Company

Penn State has confidentially settled a trademark infringement action it brought in January against real-estate companies that provide rental housing to people attending the school's football games.

Penn State Settles Trademark Case Against Stadium-Area Rental Company

Penn State has confidentially settled a trademark infringement action it brought in January against real-estate companies that provide rental housing to people attending the school's football games.

BofA Settles Action For $2.4 Bil. Over Merrill Acquisition

Bank of America Corp. has agreed to pay $2.43 billion to settle alleged federal securities law violations in Bank of America's acquisition of Merrill Lynch & Co. Inc. in 2009.