Gazprom, the Russian state-controlled natural gas giant, has appealed and requested a stay of a U.S. Bankruptcy Court’s temporary restraining order that enjoins Western financial institutions from financing Sunday’s scheduled government auction of Yukos‘ main production subsidiary Yuganskneftegaz (“Yugansk”)in Moscow. An extraordinary Saturday afternoon hearing on Gazprom’s motion for stay was scheduled before U.S. District Judge Nancy Atlas in Houston in civil case no. 04-04756. Here are the earlier posts on the fast-breaking Yukos case.
Gazprom, which is the expected to be the winner of Sunday’s auction, may not be able to finance its winning bid after a consortium of Western banks — including Deutsche Bank, ABN Amro, BNP Paribas, and Dresdner Kleinwort Wasserstein — froze a credit line of about $13 billion it had agreed to loan Gazprom for its bid. With huge banking interests in the United States, each of the banks could face legal action if they violated the TRO and went ahead and financed Gazprom’s bid.
Stay turned for late breaking developments in this fast moving case.
Update: Judge Atlas denied Gazprom’s motion for a stay of the TRO.
Meanwhile, the largest shareholder in Yukos is planning a $100 billion lawsuit against various entities involved in the Russian auction of Yukos.

London-based Clifford Chance agreed Friday to pay $5.5 million in a global settlement with the trustee of former tech law firm Brobeck, Phleger & Harrison’s bankruptcy estate and retired partners and longtime employees of Brobeck. Houston’s Lanier Law Firm, who represent the plaintiffs in the lawsuit, and Brobeck’s liquidation committee also signed off on the settlement. Here is an earlier post on the rather interesting bidding for Brobeck’s claims against Clifford Chance.
The settlement was finalized as the parties negotiated for three hours in two jury deliberation rooms next to U.S. Bankruptcy Judge Dennis Montali‘s courtroom Friday morning. The settlement mooted the necessity for an auction of Brobeck’s claims against Clifford Chance, which Judge Montali had previously ordered. The KM Group, a coalition of asbestos plaintiff lawyers, had planned to bid against Clifford Chance.
The settlement resolves the lawsuit that retired Brobeck partners and employees had filed against Clifford Chance and former Brobeck Chairman Tower Snow Jr. that sought at least $100 million in damages. The lawsuit basically claimed that Clifford Chance’s and Mr. Snow’s agreement that Mr. Snow and and 16 other Brobeck partners would bolt to Clifford Chance in 2002 triggered Brobeck’s 2003 collapse into bankruptcy.
The agreement also resolves a dispute between the plaintiffs in that lawsuit and the Brobeck trustee over the ownership of the claims against Clifford Chance. The Brobeck trustee had asserted in court pleadings that the claims primarily related to profits Clifford Chance received from unfinished business Brobeck partners had taken with them to the firm and, thus, the claims were property of Brobeck’s estate.
The settlement resolves negotiations that have been ongoing for the past six months. Clifford Chance had agreed to pay $3.75 million to Brobeck’s estate to settle the trustee’s potential claims in July. However, the KM Group emerged and offered the trustee $4 million for the estate’s claims againt Clifford Chance. The trustee then renegotiated the deal with Clifford Chance, which upped the settlement amount to $4.5 million. The KM Group’s desire to increase its offer over that settlement amount had prompted the Bankruptcy Judge to schedule the auction of the Brobeck estate’s claims.

The Fifth Circuit Court of Appeals in New Orleans issued this decision on Friday in the case of former Dynegy trader Michelle Valencia that upholds a controversial law that the Justice Department has used to charge a group of Houston natural gas traders with reporting false information in an alleged scheme to manipulate prices. Here is an earlier post on this particular prosecution.
The Fifth Circuit decision overturns a previous ruling of U.S. District Judge Nancy Atlas of Houston that the law was vague and that someone could be charged in the trader cases with delivering “false and misleading” information even if the person did not know that the data was incorrect.
In January 2003, Ms. Valencia was charged with three counts of false reporting under the Commodity Exchange Act and four counts of wire fraud. The indictment alleges that Valencia fabricated natural gas trades for submission to the publication Inside FERC’s Gas Market Report from November 2000 to February 2001. She pleaded not guilty to the charges.
This past August, a group of former natural gas traders received letters from the U.S. Attorney’s Office in Houston advising them that are targets of a criminal investigation. Then, a couple of months later, four former El Paso traders pleaded guilty to false reporting charges in connection with the probe. Finally, in late November, three more former El Paso workers and a former Reliant trader were charged with false reporting, and Ms. Valencia was also charged with conspiracy and wire fraud charges.
All of these indictments follow a lengthy investigation into alleged efforts to manipulate the trading indexes, which are used to value billions of dollars in gas contracts and derivatives. Industry publications such as the Inside FERC Gas Market Report use data from traders to calculate the index price of natural gas. Accordingly, movement in index prices often affects the level of profits traders can generate. In these particular cases, it remains unclear whether the publication actually used the false information provided. Nevertheless, the government contends that it needs only to prove that fake trades were reported and not that they were actually published or affected the markets.
These cases — along with the recent Enron-related Nigerian Barge criminal case — are at the forefront of the controversial but increasingly common tactic of federal prosecutors and state prosecutors such as Eliot Spitzer criminalizing merely questionable business practices to regulate politically unpopular business interests. As noted in this earlier post, this tactic is resulting in absurdly unjust results, such as Martin Frankel’s 25% shorter sentence than that of Jamie Olis.
Moreover, the inflexibility of the federal sentencing guidelines combined with the public animus toward business that the government’s press releases often provoke, defendants in these cases are often faced with the untenable choice of copping a plea for a short prison term or defending themselves under politically-charged circumstances against a possible prison term that would amount to a life sentence.
With the Yukos bankruptcy filing in Houston this past week, much has been made in news reports regarding the Russian government’s politically-motivated and unjust criminal prosecution of former Yukos CEO Mikhail B. Khodorkovsky. What is not as widely reported is that the current United States Justice Department policy of pursuing questionable criminal prosecutions of politically unpopular businesspersons is not much different.

U.S. District Judge Vanessa Gilmore is currently presiding over a rather ugly criminal case in Houston against against three people accused in the deaths of 19 illegal immigrants who were being smuggled into this country in the back of a blistering hot trailer. To say that the prosecution has not gone smoothly is an understatement.
On this past Thursday, after the prosecution closed its case in chief and the defendants chose not to put on any evidence in defense of the case, Judge Gilmore dismissed charges against one of the defendants, ruling that the government had failed to show that the defendant had benefited financially from an arrangement in which illegal immigrants were harbored and transported.
Then, on Friday, Gilmore threatened to hold one of the prosecutors in contempt if he failed to get a letter from U.S. Attorney General John Ashcroft by the end of the day explaining his refusal to disclose why the death penalty sought against one of the black defendants in this case is the first time that the death penalty has been sought against a defendant in an immigrant smuggling case. According to this Chronicle story on the matter, Judge Gilmore stated from the bench:

“They are taking the position that they can indict whoever they want to and charge the death penalty and not disclose the reason.”

Judge Gilmore has not yet issued an order for the prosecutors to show cause why they should not be held in civil contempt for failing to disclose the information, which is a prerequisite for the enforcement of the civil contempt penalty.