Investors in Allen Stanford’s $7 billion Ponzi scheme can sue to recoup losses from lawyers, insurance brokers and others who worked with the convicted swindler, the Supreme Court ruled Wednesday.
On a 7 to 2 vote, the court held that lawsuits filed in state courts can go forward. The majority said the ruling would not affect the Securities and Exchange Commission’s ability to enforce securities law as some had feared.
Stanford’s fraud involved the sale of bogus certificates of deposit by his Antigua-based Stanford International Bank. He is serving a 110-year prison sentence.
New York-based law firms Chadbourne & Parke and Proskauer Rose and insurance brokerage Willis Group Holdings were sued by former Stanford investors. They also sued financial services firm SEI Investments and insurance company Bowen, Miclette & Britt.
Writing for the majority, Justice Stephen G. Breyer said the Securities Litigation Uniform Standards Act did not prevent the state lawsuits from proceeding. The law says state lawsuits are barred when the alleged misrepresentations are “in connection with” the purchase or sale of a covered security, which is defined as a security listed on a national exchange at the time the alleged unlawful conduct occurred.
As the defendants in the case were not selling securities traded on U.S. exchanges, “it is difficult to see why the federal securities laws would be — or should be — concerned with shielding such entities from lawsuits,” Breyer wrote.
The Obama administration, representing the SEC, had sided with the defendants to try to protect the agency’s authority to pursue wide-ranging investigations.
Justice Anthony M. Kennedy wrote in a dissenting opinion that the ruling would have a negative impact on the SEC because it “casts doubt on the applicability of federal securities law to cases of serious securities fraud.” Kennedy was joined in dissent by Justice Samuel A. Alito Jr.
Electric car maker Tesla Motors is considering sites in Nevada, Arizona, New Mexico and Texas for a huge battery factory that would employ about 6,500 people.
Tesla plans to start construction this year and complete the factory in 2017.
The Palo Alto, Calif.-based company expects the factory to supply enough batteries for the 500,000 cars it hopes to make by 2020.
Tesla and partners including battery maker Panasonic will invest between $4 billion and $5 billion to build the factory, which would supply battery packs to Tesla’s Fremont, Calif., assembly plant.
Tesla also announced Wednesday plans to raise $1.6 billion in a debt offering. The proceeds would help finance the new factory and a lower-cost vehicle expected to go on sale at the end of 2016.
— Associated Press
● Barnes & Noble, the operator of more than 1,300 retail and college bookstores, posted a $63.2 million third-quarter profit as it trimmed losses from the Nook digital unit. Net income was 86 cents a share, compared with a loss of $3.68 million, or 14 cents, a year earlier, the New York-based company said. Sales fell 10 percent to $2 billion. The Nook unit’s loss before interest, taxes, depreciation and amortization narrowed to $61.8 million from $190.4 million a year earlier.
● J.C. Penney posted its first quarterly profit in more than two years as a return to discounting and the revival of popular private-label brands helped sales at the department-store chain’s established stores. Net income was $35 million, or 11 cents a share, in the quarter ended Jan. 31, compared a loss with $552 million, or $2.51, a year earlier, the Plano, Tex.-based company said. Excluding tax benefits and a gain on the sale of some assets, the company had a loss of 68 cents a share, less than analysts expected.
● Several U.S. senators introduced a bill that would curb electronic cigarette marketing while the fast-growing industry awaits regulation by the Food and Drug Administration. The bill would ban marketing to children based on standards set by the Federal Trade Commission and allow the agency to work with state attorneys general to enforce the ban on advertising. The battery-powered devices heat a liquid nicotine solution to create vapor that’s inhaled.
● Credit Suisse Group’s chief executive Brady Dougan, under fire from U.S. lawmakers, apologized and deflected blame onto a small group of employees for helping wealthy American clients hide billions of dollars from the Internal Revenue Service. “Some Swiss-based private bankers went to great lengths to disguise their bad conduct from Credit Suisse executive management,” Dougan said at a Senate subcommittee hearing Wednesday. A subcommittee report said 1,800 Credit Suisse employees helped Americans open 22,000 accounts, most of which were hidden from the IRS.
● U.S. banking industry earnings increased nearly 10 percent last year to a record $154.7 billion, according to the Federal Deposit Insurance Corp., an increase due mainly to banks setting aside less money to cover potential loan losses and litigation costs. The FDIC said fourth-quarter profits at the nation’s commercial banks and thrifts rose 17 percent to a total of $40.3 billion from $34.4 billion in the final quarter of 2012.
— From news services
● 8:30 a.m.: Weekly jobless claims and durable goods for January.
● 10 a.m.: Federal Reserve Chair Janet Yellen testifies at Senate Banking Committee hearing on monetary policy.
● Earnings: Best Buy, Freddie Mac, Gap, Hilton Worldwide, Sears Holdings, Wendy’s.