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From Antitrust Law Daily, April 13, 2017

Settlements with Duke Energy, investor over alleged premerger notification violations approved

By Jeffrey May, J.D.

Two of three settlements in Hart-Scott-Rodino (HSR) Act cases announced by the federal antitrust agencies in January have now been finalized. Yesterday, the federal district court in Washington, D.C. approved a consent decree, resolving allegations that entrepreneur Mitchell P. Rales violated the HSR Act by failing to report his purchases of voting securities in two industrial companies. Last Friday, the court signed off on a settlement with Duke Energy Corporation over its purported gun-jumping following an agreement to purchase the Osprey Energy Center. Both settlements required the defendants to pay civil penalties (U.S. v. Rales, April 12, 2017, Cooper, C.; U.S. v. Duke Energy Corp., April 7, 2017, Howell, B.).

Rales agreed to pay a $720,000 civil penalty under his settlement, resolving allegations that he violated the HSR Act by failing to report purchases of voting securities in Colfax Corporation and Danaher Corporation. The government alleged that Rales had violated that HSR Act by failing to file as required when his wife purchased shares in Colfax in 2011. The shares, which are attributed to Rales under the applicable HSR Rules, were above the filing threshold. According to the complaint, Rales was in violation of the HSR Act from 2011, when the shares were purchased, to 2016, when he made a corrective filing and observed the waiting period. The government also alleged that, in 2008, Rales violated the HSR Act by buying shares of Danaher that exceeded the filing threshold and by failing to file. Rales was in violation of the HSR Act between 2008, when he bought the shares, and 2016, when he made a corrective filing and observed the waiting period.

Allegations against Duke Energy. The allegations against Duke Energy arise from the energy company’s agreement to purchase the Osprey Energy Center (a combined-cycle natural-gas-fired electrical generating plant in Auburndale, Florida) from Calpine Corporation. Duke Energy also purportedly entered into a "tolling agreement" that immediately gave Duke Energy control over Osprey’s output and the right to receive the day-to-day profits and losses from Osprey’s business.

According to the complaint filed by the government, Duke Energy took control of Osprey’s business before filing the required HSR notifications and waiting for the expiration of the mandatory waiting period for antitrust review.

Under the final judgment, Duke Energy agreed to pay $600,000 in civil penalties to resolve the claims.

Third case. Approval of a third HSR consent decree announced in January remains pending. In that action, hedge fund investor Ahmet H. Okumus agreed to pay $180,000 in civil penalties to resolve charges that he violated the HSR Act when he acquired voting securities of Web.com Group, Inc., in 2016. According to the complaint, Okumus exceeded the filing threshold and failed to file as required when he bought shares of Web.com through his hedge fund, Okumus Opportunistic Value Fund, Ltd. He was allegedly in violation from June 27, 2016, when he purchased the shares, to July 14, 2016, when he sold enough shares so that he did not exceed the threshold.

The cases are No. 1:17-cv-00103-CAC and No. 1:17-cv-00116-BAH.

Attorneys: Kenneth A. Libby, Federal Trade Commission, for the United States. Steven C. Sunshine (Skadden, Arps, Slate, Meagher & Flom LLP) for Mitchell P. Rales. Robert Austin Lepore for U.S. Department of Justice, for the Unites States. Amanda L. Wait (Hunton & Williams LLP) for Duke Energy Corp.

Companies: Web.com Group Inc.; Colfax Corp.; Danaher Corp.; Duke Energy Corp.; Calpine Corp.

MainStory: TopStory AcquisitionsMergers Antitrust AntitrustDivisionNews FederalTradeCommissionNews

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