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12 charged with fraud in $400M fen-phen case Twelve people who received portions of a $400 million settlement with the manufacturer of the diet drug fen-phen in 1999 have been arrested and charged with fraud for allegedly lying about taking the drug. “These people were seeking money for a drug they never took. They conspired with others who were more knowledgeable about the system. They were never entitled to any type of compensation,” FBI agent Bob Garrity said last week. The defendants are accused of submitting fake pharmacy documents showing they used the diet drug. They face up to five years in prison and a $250,000 fine if convicted of conspiracy to commit an offense against the United States. IBM clashes with gypsies Computer giant IBM said last week it had asked Switzerland’s highest court to block a lawsuit by Gypsies claiming the company’s punch-card machines helped the Nazis commit mass murder more efficiently. IBM’s lawyers have asked the Federal Tribunal to overturn a Geneva court ruling that allowed the case to proceed, said Brian Doyle, a spokesman for the Armonk, N.Y.-based firm. “Beyond that we don’t comment on pending litigation,” Doyle told The Associated Press in a telephone interview. Sidley Austin tax plan suit allowed to proceed A Manhattan federal judge has allowed fraud and recision claims to proceed against the law firm Sidley Austin Brown & Wood and other defendants for their role in promoting a tax shelter. In sustaining some of the claims brought by William Seippel, a Virginia telecommunications executive, and his wife, Sharon, Southern District Judge Shira A. Scheindlin departed from other federal district courts that have dismissed tax shelter cases for lack of ripeness and on other grounds. “The fact that the Seippels may not ultimately owe the tax authorities additional taxes does not mean that their action is not ripe,” the judge wrote in Seippel v. Jenkens & Gilchrist, No. 03-6942. The Seippels participated in a tax shelter known as Currency Options Bring Reward Alternatives, which they were told would give them a loss of $12 million to offset a tax liability. Morgan Lewis in Dallas Morgan, Lewis & Bockius has opened a Dallas office with the former co-chairmen of Jenkens & Gilchrist’s employee benefits group and eight other Morgan Lewis partners from three different cities. Moving from Jenkens & Gilchrist are David Ackerman and John Kober, who formerly led the firm’s employee stock ownership plan team. Morgan Lewis, with about 1,200 lawyers, has 19 offices and recently opened locations in Paris, Chicago and Boston. DOJ pulls plug on Detroit terror case In a dramatic reversal last week-on the eve of President George W. Bush’s nomination acceptance-the Justice Department acknowledged its original prosecution of a suspected terror cell in Detroit was filled with a “pattern of mistakes and oversights” that warrant the dismissal of the convictions. In a 60-page memo that harshly criticizes its own prosecutors’ work, the department told U.S. District Judge Gerald Rosen it supports the Detroit defendants’ request for a new trial and would no longer pursue terrorism charges against them. The defendants at most would only face fraud charges at a new trial. The internal investigation of prosecutorial misconduct found enough problems that there is “no reasonable prospect of winning,” the government conceded. “In its best light, the record would show that the prosecution committed a pattern of mistakes and oversights that deprived the defendants of discoverable evidence ” the Justice Department said. Tax credit violates law Ohio’s investment tax credit violates the commerce clause, the 6th U.S. Circuit Court of Appeals ruled last week. The credit reduces a manufacturer’s corporate franchise tax in proportion to how much new machinery it puts into service in Ohio counties. Direct subsidies designed to draw industry to one state at the expense of others are probably constitutional, the court said. But a tax credit differs because it “involves state regulation of interstate commerce through [the state's] power to tax.” Cuno v. DaimlerChrysler Inc., No. 01-3960. The court let stand abatements of property tax that Toledo and two school districts granted to DaimlerChrysler in exchange for the building of a new plant.

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