Seven hedge funds are suing Porsche chairman Wolfgang Porsche and Ferdinand Piech, a prominent board member, after the company’s failed bid to take over car manufacturer Volkswagen.
The well-known German performance car company has been accused of misleading investors and markets during its bid for control of German automaker Volkswagen, which occurred during 2008.
At the time, the company denied being involved in a takeover bid for the large auto manufacturer. Porsche later revealed its immense ownership in Volkswagen, with the performance car manufacturer owning – or holding positions on – almost 74% of Volkswagen shares.
The company currently denies any wrongdoing. The auto manufacturer has issued a statement notifying the public that it – as well as its board members – will “defend themselves with all available legal means.”
Some investors claim to have lost significant amounts of money during the run-up to the Porsche takeover. Investors reportedly bet against Volkswagen, anticipating that they would decline in value as Porsche’s takeover bid for the car manufacturer failed.
In order to launch a takeover bid for Volkswagen, Porsche needed to control over 75 per cent of the company’s shares. As the company’s attempt to control Volkswagen occurred during the 2008 financial crisis, it failed to raise enough funds to purchase the additional one per cent stake required for control of Volkswagen.
Porsche investors claim that, during the company’s run-up to acquiring Volkswagen, it accumulated a massive amount of debt that threatened the value of their shares in the automaker. Porsche was interestingly purchased by Volkswagen one year later, in a 49.9% acquisition deal in 2009.
More recently, Volkswagen purchased an additional 50.1% share in Porsche. The car manufacturer spent 4.46 billion euros acquiring the shares, giving it full control of Porsche’s operations.Read more
Online genetic testing service 23andme has been banned from offering its personal genetic testing service to public customers after an FDA investigation revealed that its marketing claims couldn’t be backed up. The company if complying with the FDA order and said it would address the administration’s concerns.
23andme was founded in 2006 by Anne Wojcicki, who is married to Google founder Sergey Brin. The company provides users with a report on 254 personal traits and potential health conditions based on analysis of a saliva sample. As well as showing genetic data and health issues, the reports allow people to view their genealogy.
The service has been popular with the technology community, attracting a sizable amount of press attention for its unique approach to tracing one’s background and spotting potential health hazards before they appear. However, the FDA claims that the company has not provided any information on how accurate its genetic reports are, or on the detection methods used to indicate potential health risks.
The FDA is reportedly “concerned about the public health consequences of inaccurate results from the PGS device.” The administration claims that the customers of 23andme could end up self-managing their health treatments using medications or doses that are unsafe and unhealthy.
23andme claims that it “recognises that we have not met the FDA’s expectations regarding timeline and communication regarding our submission.” The company claims that its relationship with the FDA is “extremely important to us and we are committed to fully engaging with them to address their concerns.”
The ban on genetic tests is not the first scandal for 23andme. The company made headlines when it registered a “build-a-baby” patent, which allowed parents to learn about the traits their children could have based on their genetic data. The service was criticised by organisations such as Genetics and Society.Read more
Consumer group Which? claims that millions of British homes are still bombarded with unsolicited cold calls despite joining an ‘opt-out’ database. Some homes have received up to 10 cold calls every month despite clearly voicing their disinterest.
Lead generation companies in the UK are required not to call phone numbers listed on the Telephone Preference Service. Despite this, homes that have opted out from receiving marketing calls continue to be affected by telemarketers.
The Telephone Preference Service claims that complaints are always followed up, but a large number of frustrated victims of telemarketing scams claim that firms simply don’t do enough to comply with the regulations.
Many of the companies deliberately target the elderly, offering ‘phone call blocking’ services that allegedly eliminate unwanted calls. The devices often cost as much as £100, which is automatically debited from the accounts of phone marketing targets.
Alex Neil, a Which? spokesman, claims that consumers are complaining about high volumes of unsolicited commercial phone calls more than ever before. Many homes receive upwards of 10 calls a month, often from unreliable direct marketers.
Despite its popularity with consumers, the Telephone Preference Service has little in the way of enforcement powers. The organisation is funded by the Direct Marketing Association and maintains a register of 19 million individuals.
John Mitchison, one of the service’s chief executives, claims that TPS calls companies that violate the law by calling them and ‘reminding them of their legal obligations’ as direct marketers. If complaints are referred to the IFO or Ofcom, they can result in fines of up to £500,000 for companies that repeatedly ignore the regulations.
People that are repeatedly targeted by cold callers should get in touch with the TPS and add themselves to its do-not-call database. They should also be sure that they do not give out personal information to unwanted or untrusted marketing firms.Read more
Think of Cadbury Dairy Milk and you’ll probably visualise delicious chocolate in a rich purple wrapper. Despite the iconic purple colour of Cadbury’s most popular chocolate bar, the company has failed in its attempts to trademark the particular shade of purple used in its Dairy Milk packaging.
Pantone 2865c – the colour code for Cadbury’s famous shade of purple – was not granted as a trademark after rival firm Nestle challenged the application. Cadbury claims that the colour is synonymous with its well-known candy bar and that the shade of purple used in packaging has a 100-year history with the company.
The company, which was acquired by US food company Kraft in 2010 – has been engaged in a legal battle with Nestle since 2008. Cadbury aims to stop other candy and chocolate companies from using the same shade in their advertising, product packaging, and other promotions.
A spokesman from the company claims that the claim is largely due to competitors trying to ‘pass off their products as Cadbury chocolate’ by imitating the company’s famous colour scheme. The company believes that the British public links purple packaging with Cadbury chocolate – a link that competitors could abuse.
The Court of Appeal rejected Cadbury’s trademark application, noting that it ‘did not comply with the requirements for trademark registration.’ The company will likely resubmit the trademark application or appeal the decision of the Court of Appeal.
Nestle, one of Cadbury’s largest competitors, claimed that the court decision was the ‘right outcome from a legal perspective.’ The decision brings an end – at least for the time being – to over five years of legal disputes between the two chocolate giants.Read more
An infamous Goldman Sachs trader known as ‘Fabulous Fab’ will go on trial to face fraud charges related to the United States financial crisis. Fabrice Tourre, who was known as ‘Fabulous Fab’ due to his opulent lifestyle and outspoken nature, is one of the few faces of the financial crisis that pushed the United States into a recession.
Tourre is accused of intentionally misleading investors into buying bad investments that he personally knew would result in large losses. He is the first high-level banker to face trial for intentionally misleading investors since two Bear Sterns hedge fund managers, Matthew Tannin and Ralph Cioffi, were acquitted in 2009 for fraud.
The infamous trader gained his nickname after boasting in his emails that he would be ‘the last man standing’ when the financial crisis began. Tourre is one of the few traders to have documented his involvement in the fraudulent behaviour that was the cause of the financial crisis.
Tourre reportedly bragged to his girlfriend in emails sent from his company account that indicated his involvement in housing scams. ‘Fabulous Fab’ reportedly boasted to his girlfriend that he would survive while the company building would ‘collapse anytime now,’ leaving him as the only trader likely to survive the crisis.
E-mail evidence, primarily made up of self-congratulatory emails from Tourre to his friends and close industry contacts, forms that bulk of the case against the trader – a man supported by Goldman Sachs in his defence. Tourre denies any involvement in illegal financial activity and is fighting against the case with Goldman Sachs’ backing.
The trader’s trial will begin this week in Manhattan. Media attention is likely as the banker, known primarily for his self-congratulatory emails and loud personality, is one of the few high-level bank employees to face fraud charges for his involvement in the financial crisis.Read more
UK-based payday lenders are facing additional barriers as the Office of Fair Trading considers a detailed investigation into their business practices. Payday lenders have been in the spotlight recently after several councils throughout the UK blocked their websites from public computers in libraries and government offices.
Haringey council, a London city council, recently joined the list of governments that block payday lending websites. The local government blocked high-interest lenders’ websites on library and government office computers as part of a mission to protect its residents from predatory lenders and ‘excessive interest rates.’
The council is one of several to implement the ban, and its actions could be the spur for an in-depth investigation into the practices of payday lenders. The Office of Fair Trading is considering a deep investigation into the high-interest lending sector as a recent probe indicated revealed predatory lending tactics amongst many lenders.
Payday loans have grown into an increasingly damaging social issue for many of the country’s most vulnerable individuals. Debt charity StepChange has reported that, of the tens of thousands of people that contact it annually, over 7,000 of its callers have more than five payday loans out at once, all of which are charged high interest rates.
The industry is reportedly plagued by unethical tactics and predatory strategies that lure in borrowers. The OFT claims that payday lenders deliberately target a market that’s struggling financially, and that lenders frequently used misleading messages to lure customers in with claims of ‘no questions asked’ financing.
Despite the growth of the payday lending market, which is now worth an estimated £2 billion, the OFT’s tactics appear to be working. Of the 50 payday loan companies contacted by the OFT as part of its investigation, three have either surrendered their licenses or left the market entirely.Read more
Legal June 22, 2013
Jeffrey Skilling, the former CEO of controversial American energy giant Enron, has successfully petitioned for a ten-year reduction to his prison sentence. The former chief executive was one of several executives responsible for the collapse of Enron, which was previously one of the United States’ largest energy companies.
Skilling was originally sentenced to 24 years for his role in the collapse. His sentence was reduced after the former executive agreed to forfeit $40 million in assets seized by the United States government and end his appeal. The shortened sentence could see the financial fraudster released before the end of the decade.
Enron was formerly one of the United States’ largest and fastest-growing energy companies, boasting thousands of full-time employees and dominance of Texas’s large energy sector. The company used mark-to-market accounting to mislead its investors and report large profits while losing money during the late 1990s.
The company’s collapse is regarded as one of the biggest corporate failures in US history, with Skilling and former CEO Kenneth Lay both sentenced for their role in the scandal. Lay died of a heart attack while in police custody. Skilling was found guilty of 19 charges in 2006, and sentences to 24 years for his involvement.
Enron’s collapse was a devastating blow to employees and former investors, with over $62 billion in stock and pension funds wiped out as the company collapsed in 2001. The $40 million seized from Mr Skilling will be used to reimburse investors and former Enron employees, prosecutors claim.
Skilling’s shorter sentence means that he may be released this decade, largely due to the misapplication of sentencing guidelines during his original trial. For the victims of one of the world’s largest corporate frauds, it’s a frustrating change to what was seen as a major public victory in prosecuting Enron’s top executives.Read more
Two of Italy’s most well known fashion designers are facing a lengthy jail sentence for evading taxes on approximately £833 million in income. Stefano Gabbana and Domenico Dolce, the two founders of the famous Dolce & Gabbana fashion brand, were both sentences to twenty months in jail for their efforts to avoid paying tax.
The two fashion designers reportedly used an external company in Luxembourg to avoid paying taxes on revenues earned by their Italian fashion brand. The brand is based in Italy but was reportedly sold to a Luxembourg-based company in 2004 for less than its real value in an attempt to hide revenue from Italian authorities.
The Luxembourg-based company was called Gado, an anagram formed by mixing the last names of the two designers. The company has been under investigation by Italian tax authorities for over six years as part of a nationwide crackdown on the use of international companies and tax havens for avoidance of Italian taxes.
Italy’s increased attention to tax evasion indicates that many European countries are struggling with complex tax plans and illegal arrangements. The UK recently made efforts to increase its ability to monitor overseas tax evaders – a move that many European countries are planning to copy to improve tax compliance.
Both designers denied the charges and claimed that their Luxembourg company was operating completely within the law. The two designers were previously acquitted of the charges during a case in 2011 that also accused them of fraud, but the Italian high court later decided that the tax evasion charges were justified and legitimate.
The Italian court’s decision is the latest case in a wave of tax-related prosecutions in Europe. Dolce and Gabbana are appealing the decision and aim to avoid the twenty month prison sentence, which many in Italy believe may be suspended.Read more
Switzerland’s parliament has blocked debate on a new piece of legislation that could compromise the country’s strict banking secrecy laws. The United States previously asked Switzerland to implement new legislation giving American regulator access to Swiss banking customers’ account information.
Long known for its strict banking laws, Switzerland remains one of Europe’s largest financial centres. The country is currently in the spotlight due to recent revelations that indicated Swiss banks had worked with American account holders to avoid US taxes, without disclosing any information to the US Internal Revenue Service.
The country’s lower house of parliament voted against discussing the bill, with 126 votes out of 193 opposed to the bill’s introduction. The bill aims to give Swiss banks the ability to bypass the country’s strict secrecy requirements and discuss accounts and client information with US authorities.
Switzerland’s large financial sector faces possible fines from the United States due to its violations of US financial reporting laws. Swiss bank Wegelin and Co., a 270-year-old financial services company that was formerly Switzerland’s oldest bank, closed its doors in early 2013 after being indicted for assisting US citizens in tax evasion.
The efforts of US investigators to stop tax evasion using Swiss banks have increased banking security in the country, with numerous mainstream Swiss financial firms no longer accepting US citizens as clients. Many US expatriates residing in Switzerland report being turned away from Swiss banks due to US-Swiss tax reporting disputes.
For Switzerland’s large financial sector, the bill represents both progress and a large threat to their operations. If the bill is passed – which seems unlikely – it will protect banks from US indictment, yet rob them of their biggest benefit for US-based clients: their incredible level of accounting secrecy.Read more