Judge orders Bernanke to be deposed in AIG suit

July 29, 2013
LEGAL
Bernanke will be deposed in AIG suit

A U.S. judge has ordered that Federal Reserve Chairman Ben S. Bernanke can be questioned in a lawsuit against the government filed by the former head of American International Group.

It is rare for a Fed chairman to be deposed in a lawsuit. But Judge Thomas Wheeler of the U.S. Court of Federal Claims said Monday that he made an exception because Bernanke has firsthand knowledge of the government’s decision to bail out AIG at the height of the financial crisis.

Hank Greenberg, the former chief executive of AIG, has sued the government over the $182 billion bailout, which AIG has since repaid. Greenberg claims that the terms of the bailout were too onerous and is seeking at least $25 billion.

“The court cannot fathom having to decide this multibillion-dollar claim without the testimony of such a key government decision maker,” Wheeler said in his ruling.

Greenberg’s lawyers want Bernanke deposed Aug. 16. Wheeler said that date was acceptable to him, though lawyers for the government may wish to choose another date. Spokesman David Skidmore said the Fed had no immediate comment.

— Associated Press

Ex-Goldman trader’s case to go to jury

Testimony ended Monday in the civil fraud case of Fabrice Tourre, with lawyers for the former Goldman Sachs trader not calling any witnesses before the Securities and Exchange Commission’s case goes to a Manhattan federal jury.

Tourre’s lawyers had been expected to call witnesses, including hedge fund billionaire John Paulson, to testify on his behalf. Instead, his lawyers asked the presiding judge to take the case away from the jury and rule in Tourre’s favor, which, as expected, she rejected. “There is a lot of evidence the jury is entitled to weigh,” U.S. District Judge Katherine Forrest said.

Closing arguments will begin Tuesday morning, and Forrest said jury deliberations may begin Wednesday.

The SEC accused Tourre of not disclosing to investors that Paulson’s hedge fund firm, Paulson & Co., selected mortgage securities tied to a 2007 deal called Abacus 2007-AC1 and planned to bet against it.

The SEC also said Tourre misled ACA Capital Holdings, the company brought in to select assets linked to Abacus, into believing Paulson would be an equity investor in the $2 billion synthetic collateralized debt obligation offering. Investors in Abacus lost about $1 billion, while Paulson made about the same amount betting against it.

Tourre has denied wrongdoing. Goldman Sachs, originally a co-defendant, agreed in 2010 to settle with the SEC for $550 million without admitting wrongdoing.

— Reuters

Also in Business

l  The International Monetary Fund on Monday approved a further $2.3 billion in funds for Greece’s bailout program after completing the fourth review of the cash-strapped euro-zone state. Greece last week adopted the last piece of legislation its international lenders required to release the next batch of rescue loans, after two months of wrangling over unpopular measures to overhaul the economy. The funds from the IMF, the European Commission and the European Central Bank comprise $7.7 billion.

l  Hedge fund billionaire Steven A. Cohen did not let the filing of criminal charges against his $14 billion SAC Capital Advisors get in the way of a weekend party at his vacation estate in East Hampton, N.Y. Reuters reported that the lavish affair, which one source said included delivery of $2,000 worth of tuna from a local fish store to Cohen’s home, was planned before the government charged SAC Capital with wire fraud and four counts of securities fraud Thursday. On Friday, lawyers for SAC Capital entered a not guilty plea to the charges. A person familiar with the event said the party, attended by a few dozen people, was intended by the 57-year-old manager to show support for ovarian cancer research, though it was not a fundraiser.

l  A group of biotech seed companies on Monday launched a Web site, GMOAnswers.com, to combat mounting opposition to genetically modified foods among consumer groups and activists. The “central online resource” for information on genetically modified organisms and their use in agriculture and food production is backed in part by Monsanto, DuPont , Dow AgroSciences and other companies whose products include seeds that have been genetically altered in ways the companies say improve food production.

l  China Labor Watch on Monday alleged several labor violations at factories run by Apple supplier Pegatron in Shanghai and Suzhou, including poor working and living conditions, cases of underage workers and insufficient wages. The rights group’s report included eyewitness accounts from a China Labor Watch investigator who said he took a job in a Pegatron factory. Apple spokesman Steve Dowling said the company is “committed to providing safe and fair working conditions throughout” its supply chain and has conducted 15 comprehensive audits of Pegatron facilities in the past.

l  The number of Americans who signed contracts to buy homes dipped in June from a six-year high in May. The National Association of Realtors said Monday that its seasonally adjusted index for pending home sales ticked down 0.4 percent to 110.9 in June. The May reading was revised lower by a percentage point to 111.3, but it was still the highest since December 2006.

— From staff reports, news services

Coming Today

l  9 a.m.: S&P/Case-Shiller home price index for May released.

l  10 a.m.: Consumer confidence for July released.

l  Daylong: Federal Reserve’s policy-setting Federal Open Market Committee opens a two-day meeting.

l  Earnings: Chrysler, Pfizer, Sprint.

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