MoneyGram 2010 Annual Report Download - page 136

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
California Action — On January 22, 2008, Russell L. Berney filed a complaint in Los Angeles Superior Court against the Company and
its officers and directors, Thomas H. Lee Partners, L.P., and PropertyBridge, Inc. and two of its officers, alleging false and negligent
misrepresentation, violations of California securities laws and unfair business practices with regard to disclosure of the Company's
investments. The complaint also alleged derivative claims against the Company's Board of Directors relating to the Board's oversight of
disclosure of the Company's investments and with regard to the Company's negotiations with Thomas H. Lee Partners, L.P. and Euronet
Worldwide, Inc. The complaint seeks monetary damages, disgorgement, restitution or rescission of stock purchases, rescission of
agreements with third parties, constructive trust and declaratory and injunctive relief, as well as attorneys' fees and costs. In July 2008, an
amended complaint was filed asserting an additional claim for declaratory relief. In September 2009, an amended complaint was filed
alleging additional facts and naming additional defendants. The Company's previously disclosed settlement in the Minnesota Stockholder
Derivative Litigation and the Minnesota District Court's April 1, 2010 Order preliminarily approving the settlement in the Minnesota
Stockholder Derivative Litigation contain provisions enjoining MoneyGram stockholders from commencing or continuing to prosecute
any litigation involving the claims to be settled in that case. On April 5, 2010, the California court stayed proceedings in this action
pending the settlement hearing in the Minnesota Stockholder Derivative Litigation. The final order and judgment issued in connection
with the Minnesota Stockholder Derivative Litigation on June 21, 2010 enjoined Mr. Berney from prosecuting the derivative claims
alleged in the California Action that were settled in the Minnesota Stockholder Action. On October 5, 2010, the Company entered into a
Settlement Agreement to settle the claims brought individually by Mr. Berney against the Company and the defendants. The Court issued
a final judgment and order approving the Settlement Agreement in October 2010.
Patent Action — On September 25, 2009, the United States District Court for the Western District of Texas, Austin returned a jury verdict
in a patent suit brought against the Company by Western Union on May 11, 2007, styled Western Union v. MoneyGram Payment
Systems, Inc., alleging patent infringement and seeking damages and an injunction. The District Court awarded $16.5 million to Western
Union. The Company appealed the verdict. On December 7, 2010 the Court of Appeals for the Federal Circuit ruled in favor of the
Company, reversing the District Court's ruling on the grounds of obviousness of the three underlying patents that were the subject of the
appeal. The District Court proceeding also had involved a fourth patent, as to which no appeal was sought. The liability on that particular
patent is expected to be approximately $150,000 subject to a review by the District Court. Western Union filed a petition for a re-hearing
before the same panel of appellate judges or the entire appellate court "en banc", which petition was denied by the Appellate Court on
February 11, 2011.
Other Matters — The Company has been served with subpoenas to produce documents and testify before the Grand Jury in the Middle
District of Pennsylvania. The subpoenas seek information in relation to the Company's U.S. and Canadian agents, as well as certain
transactions involving such agents, fraud complaint data, and the Company's consumer anti-fraud program during the period 2004 to
2009. In addition, the Financial Crimes Enforcement Network of the US Treasury ("FinCEN") has requested information concerning the
Company's reporting of fraudulent transactions during this period. The Company has provided the information requested pursuant to the
subpoenas and continues to provide documents relating to its agents and the investigation. In November 2010, the Company met with the
Assistant U.S. Attorney for the Middle District of Pennsylvania ("AUSA") and representatives of FinCEN to discuss the investigation.
The Company is in the process of providing additional information and scheduling a follow up meeting with the AUSA and FinCEN. No
claims have been made against the Company at this time.
The Company has also received Civil Investigative Demands from a working group of nine state attorneys general who have initiated an
investigation into whether the Company has taken adequate steps to prevent consumer fraud. The Civil Investigative Demands seek
information and documents relating to the Company's procedures to prevent fraudulent transfers and consumer complaint information.
The Company continues to cooperate with the states in this matter. No claims have been made against the Company at this time.
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