A daily look at legal news and the business of law:
Wachovia Admits Violations, Will Pay $160 Million
Wachovia, now a subdivision of Wells Fargo (WFC), had a relationship with a Mexican "casas di cambio," or currency exchange house, which it structured so badly that $420 billion flowed out of Mexico unmonitored, in "serious and systemic" violations of the Bank Secrecy Act.
Because of the permissive arrangements, Mexican drug cartels were able to stash money in Wachovia accounts with impunity, using some of their proceeds to buy airplanes to smuggle more drugs. Prosecutors aren't claiming Wachovia knew the money was drug money; in fact, Wachovia's systems were so poorly set up the bank had no real way of knowing whose money it was.
The problematic arrangements ended by early 2008, and prosecutors say that Wells Fargo's anti-money laundering provisions are not deficient. Wachovia has agreed to pay $160 million, the largest-ever penalty for a Bank Secrecy Act case, and in exchange, the government will defer prosecution.
Ex-Met Lenny Dykstra Sues JP Morgan for Predatory Lending
Lenny "Nails" Dykstra has sued JP Morgan Chase (JPM) for $100 million for allegedly predatory lending actions taken by Washington Mutual, which JP Morgan acquired. According to Dykstra, Washington Mutual "fraudulently induced him to borrow more money than he could afford."
Dykstra's troubles began when WaMu allegedly reneged on a mortgage commitment it had given him to help finance his purchase of Wayne Gretzsky's house. Although WaMu helped arrange a loan from a different lender, the resulting payments were $10,000 more a month than Dykstra was making. Dykstra went ahead with the mortgage because WaMu promised he could refinance in two months. But when WaMu didn't arrange the refinancing, Dykstra ended up in bankruptcy.
Both Coppertone and Neutrogena Ads Were Deceptive, Judge Says
Last summer, Schering-Plough (SGP), the maker of Coppertone, sued Neutrogena (JNJ) over its claim that Neutrogena was "the best line of sport protection." Neutrogena responded with a number of counter-claims, alleging Coppertone's ads were deceptive. A judge found that both issued deceptive ads -- and the real loser was the consumer.
And in the Business of Law ...
Kenneth Feinberg isn't just an executive pay czar, he's also the Lehman fees czar, and in that capacity he reviews bills from law firms assisting Lehman after its bankruptcy. Admittedly, a lot of money is on the table: 15 law firms have billed Lehman over $300 million since September 2008. While Feinberg's committee is only challenging nominal amounts, the law firms are fighting back to keep even that spare change. Last summer, Feinberg slashed a whopping 0.23% of the firms $96 million in fees; this time he's challenging more like 3.0%, a good chunk of which represents charges for the time the law firms spent preparing the bills.
Fried Frank has become the latest law firm to report increased profits per partner and revenue per lawyer, despite sharply falling revenue, reflecting the firm's layoffs and partner reductions.
Cravath, Swain & Moore, however, increased both revenue and profits per partner last year, a feat pulled off by only a handful of firms. Also unusually, Cravath hired people and increased its partnership ranks.
Chadbourne & Parke delivered some bad news to 11 aspiring attorneys: They don't have jobs after all. Chadbourne had deferred the 11 members of the 2009 graduating class for a year, holding out the hope that this year they'd have jobs. But they don't.