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Legal news from Friday, May 16, 2008 |
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Federal court rules Countrywide shareholder suit can go forward
David Hanna on May 16, 2008 3:44 PM ET

[JURIST] A federal judge ruled [PDF text] this week that a shareholder derivative lawsuit brought against the directors and officers of mortgage lender Countrywide Financial [corporate website] for misrepresenting its financial condition could proceed. The court held that the plaintiffs, including a number of state pension funds, met the requisite heightened pleading standards under the Private Securities Litigation Reform Act [text] to allow the lawsuit to move to discovery. Plaintiffs said that Countryside's directors and officers failed to provide effective oversight of the company's origination, lending, and underwriting practices, which caused the company's stock to plummet. The court granted defendants' motions to dismiss some claims against current director Harley W. Snyder [corporate profile] and former director Michael E. Dougherty. AP has more.
Recently, Countrywide has objected to providing financial information during discovery in a number of bankruptcy actions brought by its borrowers. In April, the US District Court for the Western District of Pennsylvania denied [Memorandum opinion; order] Countrywides attempt to block access to its corporate and financial information in bankruptcy proceedings, holding that good cause existed and the information sought was within the aegis of federal bankruptcy rules. In March, the US Department of Justice and the Federal Bureau of Investigation launched [JURIST report] criminal investigations to determine whether Countrywide violated securities laws in the private mortgage bond market [BBC backgrounder].


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US Marine to face court martial for 2004 Fallujah death
Andrew Gilmore on May 16, 2008 11:03 AM ET

[JURIST] US Marine Sgt. Jermaine Nelson will face a court martial later this year for murder, according to an order given by Marine Lt. Gen. Samuel T. Hellman [official profile]. The murder charge, announced Wednesday, stems from an incident during the Multinational National Force-Iraq's November 2004 offensive in Fallujah [GlobalSecurity backgrounder] in which unarmed Iraqi prisoners were allegedly killed. Following the order, Nelson was given limited immunity [Newsmax report] in return for testifying against his squad leader, former Marine Sgt. Jose Nazario. In April, a federal court ruled that Nazario could stand trial [JURIST report] in a California federal court on two counts of involuntary manslaughter. AP has more.
In July 2007, the Naval Criminal Investigation Service (NCIS) [official website] announced investigations of at least 10 Marines [JURIST report] in connection with the Fallujah offensive [JURIST news archive] after former Marine Corporal Ryan Weemer admitted during a polygraphed job interview with the US Secret Service that he had witnessed indiscriminate killings in Fallujah. Military journalist Nathaniel Helms later corroborated that account, reporting that he witnessed Marines execute subdued Iraqi prisoners, whose bodies were later buried under rubble from an air strike. Weemer was charged last month with murder and dereliction of duty in March, while Nazario was charged last year with voluntary manslaughter [JURIST reports].


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SEC sues Broadcom officers for backdating stock options
Andrew Gilmore on May 16, 2008 8:53 AM ET

[JURIST] The US Securities and Exchange Commission (SEC) [official website; JURIST news archive] filed a civil complaint [PDF, text; SEC press release] in the US District Court for the Central District of California [court website] Wednesday against California-based microchip maker Broadcom [corporate factsheet] in conjunction with a scandal over the backdating of company stock options. The complaint alleges that from 1998 to 2003, Broadcom's former president and chief executive officer, Dr. Henry T. Nicholas, III, along with chief technical officer Dr. Henry Samueli, former chief executive officer William J. Ruehle, and general counsel David Dull omitted and falsified employee compensation documentation, resulting in incorrect financial statements. Samueli and Dull both took leaves of absence [Broadcom press release] from Broadcom on Wednesday, and Samueli also resigned from the Broadcom Board of Directors. AP has more.
Backdating a stock option grant typically allows the options to be set at a fraudulently-low exercise price. While the practice is not illegal on its own, it usually involves a violation of SEC and other federal reporting requirements [SOX guide]. Broadcom is the latest technology-related firm to come under SEC scrutiny for stock option backdating. In January, the former CEO of Brocade Communication Systems was sentenced to 21 months in prison and fined $15 million for the improper backdating of stock options. In October 2007, Mercury Interactive settled a similar case for a record $117.5 million. In February 2007, the US Department of Justice indicted the former general counsel of McAfee systems for stock option backdating. In January 2007, the US Attorney's office in San Francisco, CA opened a criminal probe into backdating at computer maker Apple Inc [JURIST reports].


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Colombian ex-militia head pleads not guilty to US drug trafficking charges
Mike Rosen-Molina on May 16, 2008 8:34 AM ET

[JURIST] Former Colombian militia leader Salvatore Mancuso pleaded not guilty in a Florida court Thursday to drug trafficking charges after being extradited [JURIST report] to the US Tuesday on suspicion of organizing violent massacres and drug smuggling operations. Mancuso and 13 other men are suspected of being members of the United Self-Defense Forces of Colombia [BBC backgrounder], which is designated as a terrorist group by the US. The guerrilla leaders had surrendered to Colombian authorities under a peace deal in which Colombian President Alvaro Uribe [official profile, in Spanish; BBC profile] suspended warrants for their extradition, but Justice Minister Carlos Holguin [official profile, in Spanish] told local radio that the leaders had broken the deal by continuing to organize gangs or by refusing to cooperate with government officials. AP has more.
In April, a Colombian court temporarily blocked [JURIST report] the extradition of one such leader, Carlos Mario Jimenez-Naranjo, ruling that it would deny the victims of his crime the chance to seek compensation. Despite the ruling, Jimenez-Naranjo was extradited [DOJ release] to the US earlier this month, where he could face up to life in prison if convicted.


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