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BUSINESS LAW Jury hits film company for padding budget Santa Ana, Calif. (AP)-A federal jury has ordered a film company and its owner to pay $29 million in punitive damages for inflating the budgets of 17 films. The June 18 award against Franchise Pictures came a day after jurors awarded $77 million in compensatory damages to Intertainment A.G., bringing the total award to $106 million for the German film distributor. Intertainment claimed that Franchise and its owner, Elie Samaha, had fleeced it by padding the company’s film budgets. Samaha was executive producer of the 2000 Bruce Willis hit The Whole Nine Yards. But many of his subsequent films flopped, including the sequel The Whole Ten Yards and Battlefield Earth. The deal between the two businesses stipulated that Intertainment would finance 47% of a movie’s production costs. At trial, Intertainment claimed that the inflated costs caused it to pay $115 million more than it should have. MUTUAL FUNDS Improper trading results in $100M settlement New York (AP)-Pilgrim Baxter & Associates has agreed to a $100 million settlement in an improper mutual fund trading case and will cooperate with authorities’ investigations into the company’s co-founders, the New York attorney general’s office said last week. The Wayne, Pa.-based fund complex will return $40 million to injured investors and pay $50 million in civil penalties under the terms of a deal also involving the Securities and Exchange Commission. Pilgrim CEO David J. Bullock said the agreement was in the best interest of shareholders and would allow the company to move ahead with its “core mission of managing money and serving investors.” The company had been accused of allowing certain clients to market-time their mutual funds. Though not illegal, many funds prohibit market timing, a type of quick, in-and-out-trading, because it skims profits from long-term shareholders. Regulators say funds that allow market timing commit fraud. The settlement does not include the company’s co-founders, Gary L. Pilgrim and Harold J. Baxter, who are still under investigation. Both are accused by state and federal regulators of improper trading to benefit themselves and their friends at the expense of long-term shareholders. PRODUCTS LIABILITY Gun dealer settles with police hurt in gun battle Charleston, W.Va. (AP)-A judge approved a landmark $1 million settlement last week between two New Jersey police officers and the store that sold the gun used to shoot them. Police officers David Lemongello and Kenneth McGuire of Orange, N.J., were shot with a Sturm, Ruger & Co. 9-millimeter handgun in January 2001. They were disabled and forced to retire. They killed their attacker, Shuntez Everett, in a gun battle. The settlement between the officers and the Will Co., which operated Will’s Jewelry and Loan in South Charleston, W.Va., was approved by Kanawha County Circuit Judge Irene Berger in Charleston. The shop sold the gun and 11 others in July 2000 in a “straw sale,” in which someone without a criminal record buys guns and turns them over to someone else. The store later contacted federal agents and cooperated in an undercover sting. “This is the first case in which a gun dealer will pay damages . . . for facilitating the gun trafficking in this way,” said Dennis Hanigan, an attorney for the Brady Center to Prevent Gun Violence. The center and Charleston attorney Scott Segal are co-counsel for the police officers. Lawrence Keane, an attorney for the National Shooting Sports Foundation, the trade association of the gun industry, said there have been other settlements of cases against gun stores by people who were shot, but he did not know if any of those cases involved a “straw sale.” An attorney for the store, Michael Folio, said the shop is admitting neither liability nor failure to follow industry standards, but settled because “it was a decision we found to be in the best interest of all parties.” A lawsuit is still pending against Sturm, Ruger and also names Ohio gun distributor Acusport as a defendant. Keane said that suing the manufacturer and distributor is “an attempt to extort a settlement. Manufacturers don’t control what goes on inside the store. It’s like suing Budweiser if a bartender serves an intoxicated person.” WHITE-COLLAR CRIME Embezzling his own firm, tycoon must forfeit $30M Chicago (AP)-A federal jury has ordered a politically connected insurance tycoon convicted of embezzling more than $20 million from his own company to forfeit $30 million to the government. The jury also ordered Michael Segal to forfeit 60% of his interest in Near North Insurance Brokerage Inc. Segal, 61, was taken into custody immediately after the verdict because the judge considered him a flight risk. Segal was convicted last week and faces at least 20 years in prison. No sentencing date has been set. Segal’s company was also convicted on charges including mail fraud and embezzlement. During the two-month trial, prosecutors contended that Segal looted a restricted account at Near North to finance a lavish lifestyle and build his business. The defense claimed that he was a victim of shoddy accounting practices and scheming underlings.

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