Toys ‘R’ Us faces buyout penalty

Newark, N.J. Shareholders of Toys “R” Us Inc. were told Monday that if they do not approve the buyout of the company by a private consortium, the nation’s No. 2 toy seller must pay up to $30 million to reimburse the group for expenses.

In ballots mailed Monday, stockholders also were told that if the board of Wayne, N.J.-based Toys “R” Us gets a better offer than the consortium’s bid, the company must pay the group a $247.5 million termination fee.

The toy-seller’s board has accepted a $6.6 billion buyout offer from two equity firms, Bain Capital Partners and Kohlberg Kravis Roberts & Co., and a real estate developer, Vornado Realty Trust.

If the offer is approved at a June 23 special meeting, stockholders would get $26.75 a share, the same price anticipated when the buyout was announced March 17.

The company, second only to Wal-Mart Stores Inc. in domestic toy sales, noted that the per-share price was a “substantial premium to historic trading prices.”

Morgan Stanley seeks overturn of verdict

New York Morgan Stanley is set on trying to overturn the massive $1.45 billion award it has to pay financier Ronald Perelman, but the risks of challenging the verdict could force a settlement, experts say.

Perelman, chairman of cosmetics giant Revlon Inc., was awarded $604.3 million in compensation and a further $850 million punitive damages against the investment bank for the way it acted when Perelman sold his camping gear company to the bank’s client, Sunbeam Corp., in 1998.

A Florida jury found that Perelman relied on representations by Morgan Stanley going into the sale, for which he received $1.5 billion including Sunbeam stock. Shortly afterward, an accounting fraud at the appliance maker was exposed, and the value of Perelman’s investment plummeted. Sunbeam sought bankruptcy protection in 2001.

The hefty punitive award was to punish the bank for its misconduct in defrauding Perelman. That the bank was complicit in the fraud was presented by the trial’s judge to the jury as fact without argument, as a sanction for Morgan Stanley’s continued failure to provide documents in the litigation. This action by the judge will form part of the bank’s appeal.

In a strongly worded statement following Wednesday’s verdict, Morgan Stanley said the damages award was legally deficient “and a by-product of the unprecedented and highly prejudicial rulings imposed by the judge throughout the trial.”

Publishers protest Google book venture

San Francisco A group of academic publishers is challenging Google Inc.’s plan to scan millions of library books into its Internet search engine index, highlighting fears that the ambitious project will violate copyrights and stifle future sales.

In a letter scheduled to be delivered to Google Monday, the Association of American University Presses described the online search engine’s library project as a troubling financial threat to its membership – 125 nonprofit publishers of academic journals and scholarly books.

The plan “appears to involve systematic infringement of copyright on a massive scale,” wrote Peter Givler, the executive director for the New York-based trade group.

The association asked Google to respond to a list of 16 questions seeking more information about how the company plans to protect copyrights.

Two unnamed publishers already asked Google to withhold its copyrighted material from the scanners, but the company hasn’t complied with the requests, Givler wrote.

Mountain View-based Google didn’t immediately return phone and e-mail messages left Monday.

Vioxx-related lawsuits piling up for Merck

New Orleans A federal judge told dozens of lawyers crowded into a courtroom here Monday that there could ultimately be up to 100,000 cases filed against Merck & Co. over its now-withdrawn pain reliever Vioxx, and that he could hear a case as early as the fall.

There have been over 2,000 cases filed against the drugmaker so far. The pretrial issues for federal cases are being handled by U.S. District Court Judge Eldon Fallon, and lawyers from both sides met here for a monthly status conference.

Analysts have estimated that Merck’s potential liability could reach $18 billion. Merck withdrew Vioxx from the market last September after a study showed it doubled patients’ risk of heart attacks and stroke in people taking the drug longer than 18 months.

The plaintiff’s attorneys are squabbling with Merck over records of thousands of company employees engaged in marketing the drug. Plaintiff lawyers want details on Merck employees who marketed the drug. A lawyer for Merck told the court Monday it would be “tremendously burdensome” to provide the information; the lead plaintiffs’ lawyer, Russell Herman, countered afterward that Merck’s sales representatives were “told to dodge” potentially awkward questions.

Banks warn customers of records breach

Charlotte, N.C. More than 100,000 customers of Wachovia Corp. and Bank of America Corp. have been notified that their financial records may have been stolen by bank employees and sold to collection agencies.

In all, nearly 700,000 customers of four banks may be affected, according to police in Hackensack, N.J., where the investigation was centered.

So far, Bank of America has alerted about 60,000 customers whose names were included on computer disks discovered by police, bank spokeswoman Alex Liftman said Monday.

Wachovia said it has identified 48,000 current and former account holders whose accounts may have been breached.

Both banks are providing the affected customers with free credit reporting services.

The bank record theft was exposed April 28 when police in Hackensack charged nine people, including seven bank workers, in an alleged plot to steal financial records of thousands of bank customers.

The bank employees accessed records for customers of Cherry Hill, N.J.-based Commerce Bank, PNC Bank of Pittsburgh, and Charlotte-based banks Wachovia and Bank of America, according to Hackensack Police Chief Ken Zisa.