February 2008

Judge quits after DUI bust

Fed jurist reportedly in drag when stopped

By O’Ryan Johnson

02-16-08 -- A 63-year-old Massachusetts federal bankruptcy judge has resigned a week after he was arrested for driving under the influence in New Hampshire while reportedly wearing a woman’s dress, heels and stockings, and carrying a purse. . ..  Judge Robert Somma, a Newbury resident, pleaded no contest to the drunken driving charge in New Hampshire and agreed to have his license suspended for 12 months, the Manchester Union Leader reported. . . . “He decided with the media coverage the way it had been, it was best to put this behind him,” Gary Wenta, circuit executive for Boston’s First Federal Circuit, told the Herald. . ..  Wenta said Somma worked in private practice for years in Boston before he was appointed to the bench by President Bush in December 2004. He will remain on leave until he resigns on April 1, after roughly three years on the job. . ..  “He’s a highly respected member of the bar and remains so,” Wenta said. “He was serving a 14-year appointment. This will leave him without a pension.”

MASSACHUSETTS   

Judge OKs Gitto/Global payment

Law firm’s insurer can pay $2.1M settlement

By Martin Luttrell Telegram & Gazette Staff

02-08-08 -- A U.S. Bankruptcy Court judge allowed the insurer for the law firm of Bowditch & Dewey LLP to make a $2.1 million settlement payment to the bankruptcy estate of former Lunenburg plastics company Gitto/Global Corp. . . . Mark G. DeGiacomo, bankruptcy estate trustee for Gitto/Global, filed a motion in December for Liberty Insurance Underwriters Inc. to pay $2.1 million to the estate for “recovery of damages relating to various possible causes of action” stemming from Bowditch & Dewey’s representation of Gitto/Global prior to its filing for bankruptcy in September 2004. . . . Mr. DeGiacomo told the court yesterday that the law firm had a conflict of interest in continuing to represent the company and its principals individually after they allegedly began engaging in fraudulent activities.

NEW YORK  

Judge Cuts Firm's Fees Over Failure to Show Ties to Client

Joel Stashenko, New York Law Journal 

02-06-08 -- Nearly $75,000 in legal fees have been blocked by a federal judge who complained that a Long Island, N.Y., law firm was "purposefully vague" in disclosing that its lead attorney in a bankruptcy case was the son-in-law of the executive of one of several unsecured creditors it was representing. . . . Had the court known in 2002 about the relationship, it might have been "reluctant" to appoint Berkman, Henoch, Peterson & Peddy of Garden City to represent a committee of creditors in the Chapter 11 case, wrote Stephen D. Gerling, chief judge of the Northern District Bankruptcy Court. . . . In a 2002 affidavit, Berkman Henoch attorney Ronald M. Terenzi stated that an unnamed partner in the firm who would be primarily responsible for representing the creditors "is related to and [sic] officer and shareholder of one of the general unsecured creditors of the Debtors." . . . In fact, Gerling wrote in In Re: Matco Electronics Group Inc., 02-bk-60835, Berkman Henoch attorney Douglas Spelfogel was the son-in-law of Joel Girsky, the chief executive officer of Jaco Electronics Inc., one of the creditors in the action. The judge said it also appears that Spelfogel's wife, Wendy, later became in-house counsel at Jaco.

January 2008

NEW YORK  

Bankruptcy Allegations Move Forward Against N.Y. Law Firm

Beth Bar, New York Law Journal 

01-30-08 -- Stressing that the case raised "important issues concerning the integrity of the bankruptcy process," a federal bankruptcy judge in Manhattan has declined to dismiss claims by a trustee against a Westchester County, N.Y.-based law firm. . . . In In re Food Management Group (Grubin v. Rattet), 04-22880, Judge Martin Glenn ruled that allegations of fraudulent concealment, breach of fiduciary duty, negligence and fraud on the court could proceed against attorneys Robert L. Rattet and Jonathan S. Pasternak, as well as the law firm Rattet, Pasternak & Gordon Oliver. . . . The lawyers and the firm are accused of failing to disclose that an "insider" of debtor Food Management Group had violated a court order by submitting a bid in the auction of the company's assets. . . . The trustee also alleged that the lawyers improperly failed to disclose that they had represented one of the insiders before the auction.

Bankrupt companies choose Del. to file

Court sees majority of large cases

By Maureen Milford, The News Journal

01-16-08 -- Delaware's Bankruptcy Court is once again the preferred emergency room for big businesses in serious financial health, particularly subprime home mortgage lenders. . . . In 2007, nearly 80 percent of major companies that sought bankruptcy protection in the federal court chose Wilmington, according to bankruptcy data compiled by Lynn LoPucki, a professor at UCLA School of Law. . ..  High-profile cases filed in Delaware by public companies with assets of more than $250 million include the two largest subprime lenders in bankruptcy, American Home Mortgage Investment Corp. and New Century Financial Corp. Electronics retailer Tweeter Home Entertainment Group Inc. also filed in Wilmington.

Countrywide Draws Ire of Judges

Questions About Practices Arise in Bankruptcy Cases; Possible Liabilities for BofA

By Amir Efrati & Kara Scannell

01-14-08 -- More federal bankruptcy judges are calling into question the business practices of Countrywide Financial Corp., as Bank of America Corp. prepares to buy the ailing mortgage lender. . . . According to court documents in a bankruptcy case in Houston, Countrywide didn't properly credit a borrower's payments made during bankruptcy but instead applied them to prebankruptcy debt, which isn't allowed. In the same case, involving a debtor named William Allen Parsley, Countrywide represented to the court that Mr. Parsley owed fees that turned out to be unsubstantiated and in error. These included an improper $450 fee and a $65 unsubstantiated fee. . . . During a hearing last month, U.S. Bankruptcy Judge Jeff Bohm chastised Countrywide and its lawyers after the company admitted making numerous errors in the case. "How many times do I have to listen to that before I conclude, 'You know, there's got to be some kind of reckoning' when I keep hearing time after time, 'we made a mistake, we made a mistake, we made a mistake, we made a mistake?'" Judge Bohm said. He is considering sanctions against the company.

Bill gives judges power over mortgage rates

By Laura Theis

01-04-08 -- Federal legislators are trying to pass a bill that would give bankruptcy judges power over mortgage terms. . . . The bill, passed by the House Judiciary Committee on Dec. 12, would allow a bankruptcy judge to lower the interest rate on a mortgage to a level more affordable for the borrower or extend the duration of the mortgage for up to 30 years. . . . Advocates believe the bankruptcy bill, dubbed the Homeowners Mortgage and Equity Savings Act, could help the more than 500,000 borrowers already in default to avoid foreclosure. . . . Locally, no one disputes that any measure to help struggling homeowners is a positive step, but some say meddling with the free market could trigger money troubles. . . . Pearl Kamer, chief economist at the Long Island Association, said the changing of a mortgage by a third party is “really interfering with the contracting process.”

December 2007

Personal bankruptcy filings soar

Number of cases filed in southeast Michigan jumped 63 percent through October 2007.

Nathan Hurst / The Detroit News

The number of southeast Michiganians declaring bankruptcy is skyrocketing. . . . Through October, the number of Chapter 7 personal bankruptcies filed in Detroit's federal bankruptcy court jumped 63 percent compared with the first 10 months of last year. With two months of 2007 filings still to be reported, there already are 4,700 more Chapter 7 filings this year than for all of 2006. . . . Financial experts say the reasons for the recent ramp-up in bankruptcy filings are well-known to many Michiganians. . . . "It's definitely about the bad economy and housing market," said Natasha Swoish, manager of bankruptcy counseling and education services at GreenPath Inc., a Farmington Hills-based credit counseling service. "Especially from the Detroit area, we're seeing a lot of people coming in because of foreclosure. It's a last-ditch effort to try and save their homes." . . . Swoish said GreenPath's counselors work with those in debt to set up plans with creditors, rather than defaulting or seeking bankruptcy protection. But lately, she said, that option of last resort has become necessary for those out of work and swimming in debt.

Data-Loaded Court Forms Raise Privacy Issue

Judiciary not sold on proposal requiring debtors to use 'data tags'

By Marcia Coyle, The National Law Journal

12-12-07 -- The Executive Office for U.S. Trustees, which oversees the federal bankruptcy system, wants the federal judiciary to require debtors to file data-enabled bankruptcy forms. But the judiciary, not yet sold on the idea, is worried about privacy, costs and fairness. . . . "Data tags" mark each piece of data entered into individual fields in a data-enabled form. They permit the computer system to automatically extract and aggregate financial and other information from bankruptcy filings. The tags are invisible to the user. . . . Clifford White III, director of the executive office, recently told a House committee that the mandatory forms would make the U.S. Trustee Program's implementation of the new bankruptcy reform law "vastly more time and cost efficient" in several key areas, such as calculating the means test to determine eligibility for Chapter 7 relief and identifying cases for audit under statutory case selection standards.

CALIFORNIA  

Trustee Says Pillsbury Should Return Fees

In the SonicBlue case, the bankruptcy trustee agrees that the conflicted-out firm should give back its fees, and possibly more

Niraj Chokshi, The Recorder 

12-12-07 -- Pillsbury Winthrop Shaw Pittman is one step closer to being forced to return about $4 million to a former client. . . . The Chapter 11 trustee for SonicBlue Inc. filed a statement on Tuesday supporting a November motion, filed by SonicBlue, asking Pillsbury to pay back the fees. . . . Tuesday's statement took the motion even further. In it, Trustee Dennis J. Connolly suggested that the judge hold off on setting an amount so that other issues such as interest or even potential damages could be considered.

NEW JERSEY  

Lawyer in Dwek case vanishes

By James W. Prado Roberts, Staff Writer

12-12-07 -- Where in the world is Anthony T. Yeh? . . . Key players in the Solomon Dwek bankruptcy case want to find the elusive lawyer, who a new court filing claims may have helped Dwek defraud a major bank of millions of dollars. . . . Yeh is an obscure but key figure connected to the downfall of Dwek's real estate empire last year. Yeh represented HSBC Bank on four loans, totaling $78 million, that helped fuel Dwek's property-buying spree in 2005. . . . The spree ended in disaster. Dwek repaid one $20 million loan from HSBC with a bounced check, which started the unraveling of his empire. . . . Today, Dwek, 35, of Ocean Township, is facing federal bank fraud charges, bankruptcy and angry creditors who claim that he owes them $350 million. . . . Dwek's bankruptcy trustee as well as several other lawyers in the sprawling case, would like to know where Yeh is. . . . "Yeh may have been involved with the fraud," Dwek bankruptcy trustee Charles A. Stanziale Jr. stated in federal court papers filed Monday. . . . PNC Bank, which accepted Dwek's bad check last year and was unwittingly used to pay off the $20 million HSBC loan, has tried to find Yeh.

Hospitals Need Lawyers -- Stat!

Kellie Schmitt, The Recorder

12-10-07 -- When Culver City, Calif.'s Brotman Medical Center filed for Chapter 11 bankruptcy in late October, attorneys paid attention. . . . Its financial struggles are likely to be a harbinger of hospital woes to come as the number of uninsured patients grows and hospital revenues decrease. . . . "All of those factors are forming a real storm for hospitals," said Stephen Warren, a partner in O'Melveny & Myers' L.A. office. "And this wave is going to involve sophisticated counsel." . . . That's why O'Melveny is actively targeting hospital bankruptcies, hoping to cash in on a climate of upheaval. It hopes to compete against firms more established in the health care area. Other firms, such as Buchalter Nemer, are ramping up as a hospital crisis looming in California may mean plenty of legal work to go around. . . . "It's an area in which we're putting a heavy degree of emphasis," Warren said. "Some of the hospital bankruptcies won't be big, but the aggregate will have a significant impact." . . . It's also worthwhile on the billing-rate side, he added: "These are not discounted rates. They tend to be very high margin, since these are bet-the-hospital problems."

November 2007

Bankruptcy Trustee Suits Cause Increasing Concern for Law Firms

Anthony Lin, New York Law Journal