08-31-10 -- In a novel approach to applying the doctrine of judicial estoppel, a federal judge has ruled that a plaintiff in a pregnancy discrimination suit who failed to inform the Bankruptcy Court of her pending discrimination claims must be barred from seeking any compensatory damages in that case, but should still be allowed to pursue declaratory and injunctive relief. . . . In his 21-page opinion in Hardee-Guerra v. Shire Pharmaceuticals, Senior U.S. District Judge Jan E. DuBois found that "the purpose of judicial estoppel -- deterrence against manipulation of the judicial process -- is served by barring Hardee-Guerra from pursuing her claims for compensatory damages while allowing her to seek appropriate equitable relief."

FEDERAL COURT

Bankruptcy Action Can Be 'Commenced' Despite Failure to Meet Law's Requirements, 2nd Circuit Says

Mark Hamblett, New York Law Journal

08-30-10 -- A bankruptcy action can be considered "commenced" even when a debtor has failed to meet a requirement imposed by Congress that he first receive credit counseling, the 2nd U.S. Circuit Court of Appeals ruled Thursday. . . . Interpreting a "statutory tangle" of bankruptcy provisions, the circuit said the counseling requirement under 11 U.S.C. §109(h) is not jurisdictional in nature and a case can still be regarded as begun by the filing of a bankruptcy petition, which triggers an automatic stay. . . . Section 109(h), added to the code by Congress in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, was interpreted by the 2nd Circuit in three separate pro se bankruptcy cases that were on appeal. Adams v. Zarnel, 07-0090-bk, was the lead case.

Judge Sets Nov. 1 Trial Date for $4 Billion Investor Claims in WaMu Chapter 11

Alison Frankel, The American Lawyer

08-27-10 -- Delaware federal bankruptcy court Judge Mary Walrath is going to have a doozy of a fall. On Sept. 7, she's set to receive a report from the recently appointed examiner in the Washington Mutual Inc. Chapter 11, who has a broad mandate to investigate the circumstances of WMI's September 2008 demise. On the same day, WMI is scheduled to file its response to an adversary proceeding brought by holders of $1 billion in WMI trust preferred securities, who assert that WMI and JPMorgan Chase wrongfully appropriated $4 billion for WMI's estate. . . . At a hearing in Wilmington on Tuesday, Walrath said trial in the adversary case would begin on Nov. 1, as the first order of business in the confirmation hearing on WMI's reorganization plan. And according to the trust preferred investors' counsel at Brown Rudnick, the outcome of that proceeding may derail the rest of the confirmation hearing.

Avoid bankruptcy . . . Start Fixing Your Credit Today

A Victims-of-Law Advertiser

Chorus of Bankruptcy Lawyers, Investors Protest Rothstein Agreements

Settlements call for 'bar orders'

Julie Kay, Daily Business Review

08-16-10 -- A packed courtroom of bankruptcy attorneys and a few investors turned out for the first settlement hearings in the Rothstein Rosenfeldt Adler bankruptcy case, and many were there to protest the agreements. . . . A latecomer to the case, Miami solo practitioner Paul McMahon, threw a monkey wrench into the settlements with George Levin and his Banyon investment funds. Banyon and Levin were the top source of money for Scott Rothstein's $1.2 billion Ponzi scheme, kicking in about $830 million. . . . Thursday, McMahon filed involuntary bankruptcies against Levin and Banyon in a move he said was likely to kill the settlement proposed by RRA bankruptcy trustee Herbert Stettin. McMahon represents more than 30 Banyon investors who claim they lost about $15 million.

Judge Seals Rothstein File Posted on PACER

Julie Kay, Daily Business Review

08-13-10 -- U.S. Bankruptcy Judge Raymond Ray agreed to seal a file released by a web services company that the Rothstein Rosenfeldt Adler bankruptcy trustee said contained privileged work product as well as passwords and logons to the system. . . . Chuck Lichtman, an attorney for bankruptcy trustee Herbert Stettin, angrily asked Ray to seal the information filed with the court late Friday. The information was posted on PACER, the federal court's computer document system.

Help Support Victims-of-Law on the web by
purchasing from its Advertisers & Associates

Capmark Creditors Seek Right to Sue Citigroup, Goldman Sachs

Zach Lowe, The American Lawyer

08-12-10 -- In a twist on a theme we've seen in a couple of prior bankruptcies, the creditors committee in the Capmark Financial Group case is taking aim at heavyweight lenders who loaned Capmark money just before its bankruptcy and the advisers who negotiated the loans -- including Dewey & LeBoeuf. The creditors have asked the court to allow them to sue the key lenders, including Goldman Sachs and Citigroup, claiming Capmark and Dewey won't file the suit themselves, according to court papers filed Wednesday.

Bankruptcy Judge Denies WaMu's Attempt to Get Shareholder Data

Bank holding company says it needs to know whether shareholders have the financial ability to wage a proxy war

Randall Chase, The Associated Press, Law.com

08-11-10 -- A Delaware bankruptcy judge on Tuesday rejected Washington Mutual Inc.'s attempt to get personal financial information from shareholders who are demanding an annual company meeting. . . . Attorneys for the bank holding company argued that it needs to know whether the shareholders have the financial ability to wage a proxy contest before funds from the bankruptcy estate are spent on an annual meeting. . . . But attorneys for the shareholders committee noted that its members have promised not to wage a proxy contest, and that the company is just trying to stall.

Bankruptcy Lawyers Predict Upcoming ‘Debt Wall’

By Debra Cassens Weiss, ABA Journal

08-11-10 -- Top bankruptcy lawyers are in a pessimistic mood about the economy, which could be a positive for their business. . . . Speaking at a roundtable discussion last month, the experts warned of trillions of dollars in debt coming due, according to the Wall Street Journal blog Bankruptcy Beat. Businesses that can’t refinance when debt matures will end up in default, they said.

$125 Million Shareholder Settlement Approved in New Century Financial Collapse

Amanda Bronstad, The National Law Journal

08-10-10 -- A federal judge on Monday granted preliminary approval to a $125 million cash settlement for shareholders of bankrupt New Century Financial Corp., one of the largest lenders to collapse during the subprime mortgage meltdown. . . . The settlement involves three stipulations: Auditor KPMG LLP will pay $44.75 million; the underwriter defendants will pay $15 million; and New Century's former officers and directors collectively will pay more than $65 million.

GENERAL

Baker & McKenzie to Pay $6 Million in Settlement Over Coudert Business

Nate Raymond, New York Law Journal

08-02-10 -- Baker & McKenzie has agreed to pay $6.65 million to compensate the bankruptcy estate of Coudert Brothers for profits Baker earned from unfinished business that partners took with them when they left the defunct Coudert firm. . . . The settlement resolves a lawsuit brought in April 2009 by the liquidation plan administrator for Coudert's estate seeking to recover fees that allegedly should have gone to Coudert, which dissolved nearly five years ago. . . . Baker also will forfeit most of its interest in an estimated $17 million in contingency fees for litigation former Coudert partners were handling involving coal export excise taxes. Baker & McKenzie had already collected roughly $7 million of those fees, said William Brandt Jr., the president of Development Specialists Inc., which is administering the Coudert estate's plan of liquidation. But three of the coal companies Coudert and Baker represented have refused to pay the contingency fee, Brandt said. Litigation against those companies is now likely, he added.

HELP KEEP VICTIMS-OF-LAW ON THE WEB
SHOP OUR ADVERTISERS OR CONTRIBUTE NOW

July 2010

Lehman Legal Fees Approaching $400 Million

Brian Baxter, The American Lawyer

07-23-10 -- Just how much are bankruptcy lawyers and advisers making in the ongoing Lehman Brothers bankruptcy? . . . Bloomberg reports that the $873.1 million in fees billed since the case was filed in September 2008 would quadruple the annual payroll of the New York Yankees. According to a Thursday filing by the Securities and Exchange Commission, 17 law firms collectively will bring in at least half that amount, with almost $396.7 million being paid out by the debtor in the largest bankruptcy case in U.S. history. . . . Lehman's lead counsel at Weil, Gotshal & Manges is by far the biggest earner on the matter. The firm's Lehman haul now stands at nearly $200.6 million. Weil isn't alone on the debtors' side--10 other firms also have roles advising what remains of Lehman.

Approved Congoleum Bankruptcy Plan Puts All Asbestos Claims in Same Boat

Congoleum's insurers, whose refusal to cover the mounting claims triggered the corporation's bankruptcy, are to contribute $253 million to the fund

Mary Pat Gallagher, New Jersey Law Journal

07-21-10 -- After nearly seven years and more than a dozen failed attempts, a reorganization plan allowing Congoleum Corp. to emerge from bankruptcy has finally met with a federal judge's approval. . . . The Chapter 11 plan, approved June 7 and effective July 1, establishes a fund to pay an estimated 100,000-plus asbestos claimants. Congoleum's insurers -- whose refusal to cover the mounting volume of those claims triggered the bankruptcy -- are to contribute $253 million, and the reorganized Congoleum has pledged 50.1 percent of its equity. . . . All asbestos claimants -- even those who agreed to settle before the bankruptcy case was filed on Dec. 31, 2003 -- are placed in the same class and their claims are to be processed through the plan trust and resolved in the same manner. . . . In an opinion issued Monday, U.S. District Judge Joel Pisano in Trenton said the single-class placement is consistent with In re Combustion Engineering, 391 F.3d 190 (3d Cir. 2005), which held that a pre-bankruptcy settlement with some asbestos claimants violated the Bankruptcy Code's requirement of equality of distribution among creditors. That ruling changed the landscape for resolving mass claims in the bankruptcy context. . . . The approved Congoleum plan wiped clean a series of settlements with various groupings of claimants both before and during the bankruptcy case.

Quinn, Susman Both Claim Victory in WaMu Hearing

Zach Lowe, The American Lawyer

07-21-10 -- The Washington Mutual bankruptcy is going to fly past the two-year mark after a federal judge granted shareholders' request to have an independent examiner investigate whether creditors and the WaMu estate are leaving billions on the table in a proposed settlement, according to Reuters and lawyers who were in the courtroom Tuesday. . . . Judge Mary Walrath's ruling means that creditors and the WaMu estate must wait a little more than six weeks before they can truly start the process of gathering official support for the proposed plan to end WaMu's Chapter 11 case. That plan would resolve potential litigation between WaMu and JPMorgan, which purchased WaMu at the height of the financial panic in 2008, and would provide about $6.8 billion in recovery for creditors. Shareholders would receive nothing under that plan. But a committee of shareholders, represented by Susman Godfrey, believe the proposed plan might shortchange the value of certain WaMu assets and of potentially explosive legal claims WaMu might make against JPMorgan. An examiner, to be appointed Monday, will look into all of this.

NEW YORK

Filing Involuntary Bankruptcy Against Ex-Client Gets Law Firm Sanctioned

Charles Toutant, New Jersey Law Journal

07-21-10 -- A law firm must pay punitive damages, attorney fees and costs for its bad-faith filing of an involuntary bankruptcy petition against a former client as a "tactical maneuver," a U.S. bankruptcy judge in Trenton, N.J., has ruled. . . . Scarola Ellis of New York claims Skyworks Ventures Inc. of Jamesburg, N.J., owes it $200,000 in legal fees, while the former client says in a related suit in U.S. District Court in the Southern District of New York that Scarola Ellis engaged in overbilling and legal malpractice. . . . On July 15, U.S. Bankruptcy Judge Raymond Lyons ruled in In re: Skyworks Ventures, Inc., 10-24459, that Scarola Ellis filed the involuntary bankruptcy petition against Skyworks Ventures to pressure a settlement in the district court suit. . . . This "use of the bankruptcy process for an improper purpose" constituted bad faith that warranted punitive damages, and, while the bankruptcy law is intended to benefit creditors as a group, Scarola Ellis's actions were intended to benefit only itself, Lyons wrote.

MASSACHUSETTS

Former Saugus attorney faces federal fraud charges

By June Q. Wu , Boston Globe Correspondent

07-15-10 -- A former Saugus attorney hid almost a million dollars in state lottery winnings from bankruptcy courts and sold the rights to one of two winning tickets for $360,000 after filing for protection from creditors, prosecutors said yesterday. . . . James S. Gregson, 40, of Andover, was charged in federal court in Boston with two counts of bankruptcy fraud and filing a false tax return. If convicted, he faces up to eight years in prison and $600,000 in fines. . . . Prosecutors said that three years before filing for bankruptcy in October 2005, Gregson purchased the rights to two $1 million winning state lottery tickets — “Cash Windfall’’ and “Set for Life’’ — from an unnamed source. Each paid $35,000 a year for at least 13 years, according to Assistant US Attorney Mark J. Balthazard. Gregson failed to disclose the lottery tickets or the annuity payments he had received to the bankruptcy court, Balthazard said. In May 2006, his bankruptcy trustee received a tip about the undisclosed assets.

FLORIDA

Feds Get Upper Hand in Battle Over Seized Rothstein Assets

Julie Kay, Daily Business Review

07-14-10 -- At least one defendant being sued by the Rothstein Rosenfeldt Adler bankruptcy trustee in the collapse of Scott Rothstein's fraud is seizing on an order by U.S. District Judge James Cohn to try to stall an action against him. . . . Cohn ruled the federal government wins the fight for control of real estate and other assets seized in the former law firm chairman's $1.2 billion Ponzi scheme. The judge decided Friday that the law firm's bankruptcy trustee can claim only monies that can be traced to RRA bank accounts -- even though the law firm was the primary vehicle for Rothstein's fraud. . . . "Because the trustee has failed to adequately plead his claim to the miscellaneous properties or the real properties, the court dismisses the portions of the Chapter 11 trustee's verified claims and petition that pertain to any property other than the RRA accounts," ruled Cohn, the judge in Rothstein's criminal case.

Stop Throwing Darts at the Phone Book Hoping to Find a Lawyer!

A Victims-of-Law Associate

Does Bankruptcy Put a Gay Website’s Teen User Info Into Creditors’ Hands?

By Martha Neil, ABA Journal

07-13-10 -- An effort by bankruptcy creditors to obtain the one valuable asset of a dying website—its database of information about 1 million subscribers and users—is raising privacy concerns both in the United States and abroad. . . . Because the website is for XY Magazine, whose focus is on young men and teenage boys who are gay, the user information is particularly sensitive. And, says a letter sent by the Federal Trade Commission earlier this month to counsel involved in the in the New Jersey bankruptcy case, providing subscriber information to creditors or even using it to start a similar publication or website could be considered an unfair or deceptive practice by the FTC, according to the BBC and IDG News.

Former Client Claims Advice From DLA Piper Led to Bankruptcy

The lawsuit offers a glimpse into the developing area of third-party litigation funding

Nate Raymond, New York Law Journal

07-13-10 -- A bankrupt outdoor furniture distributor has sued DLA Piper, claiming the firm failed to properly advise it in transactions and subsequent litigation with a Taiwanese company. . . . Joseph DelGreco & Co. Inc., a privately owned New York corporation that filed for Chapter 11 in October 2009, sued DLA Piper (pdf) earlier this month in Manhattan Supreme Court, claiming the law firm's negligence resulted in financial losses that propelled the company into bankruptcy. Among other things, DelGreco claims DLA failed to advise it of the consequences of a minor default on a loan and also pressured DelGreco to let the firm withdraw as counsel on the eve of a multimillion-dollar arbitration. . . . DelGreco's lawyer, Hartley T. Bernstein at Bernstein Cherney, in an interview called his client's predicament an "unfortunate situation that was a domino effect from day one that just kept getting worse until the company was eventually forced into bankruptcy." . . . DLA Piper in a statement called the claim "without merit" and said it would "strongly defend" itself against the suit. . . . In addition to alleging malpractice and negligence by DLA, the lawsuit offers a glimpse into third-party litigation funding, a developing area where details remain scarce as to what kinds of cases are financed by the third-party litigation companies. DLA Piper at one point referred DelGreco to two litigation funders in order to raise $500,000 in financing, only to see both turn down the pitch, the complaint said.

Bankruptcy shadow lengthens in Mercer

Meir Rinde, The Times of Trenton - NJ.com

07-12-10 -- Bankruptcy filings are soaring locally and across the nation as unaffordable mortgages, job losses, the credit squeeze and mounting debt force individuals and businesses to default on their obligations and go to the courts for relief. . . . And bankruptcy attorneys say there's little sign of relief on the horizon. . . . "People have exhausted their savings, if any, and are literally living paycheck to paycheck or, more appropriately, from unemployment check to unemployment check," said Scott Kaplan of Malsbury Armenante & Kaplan in Allentown. "It's going to go a lot higher, based on what I'm seeing." . . . In New Jersey and nationally, the number of bankruptcies of all kinds jumped 27 percent in the 12 months ending in May, compared to the same period a year earlier, according to federal court statistics. In Mercer County they climbed 21 percent.

Filing Bankruptcy Online Without Bankruptcy Lawyers Is Not a Good Idea

Mortgage11 | Bankruptcy, Mortgage Refinance

07-12-10 -- While some bankruptcy filers prefer to go it all alone, filing bankruptcy online without the services of a qualified and experienced attorney is not a desirable proposition. Considering the seriousness of the situation, it could be foolish to file a personal bankruptcy on your own without any expert guidance. Besides, there are other reasons to avoid filing a bankruptcy petition which such debtors are completely unaware of. . . . While some bankruptcy filers prefer to go it all alone, filing bankruptcy online without the services of a qualified and experienced attorney is not a desirable proposition. Considering the seriousness of the situation, it could be foolish to file a personal bankruptcy on your own without any expert guidance. Besides, there are other reasons to avoid filing a bankruptcy petition which such debtors are completely unaware of. Here is some critical information pertaining to the same and which could invariably help probable individuals who are considering filing chapter 7 bankruptcy protections.

Possible benefits that bankruptcy can bring:

Allows for the discharge of most, if not all of your debts.

Prevents property from being repossessed.

Stops the collection process

Prevents you from having your utilities cut off

Stops/Prevents wage garnishment.

A Victims-of-Law Associate

FLORIDA

Judge Ready to Decide Who Will Control Millions in Rothstein Assets

Julie Kay, Daily Business Review

07-09-10 -- The thorny question of who will control and divide tens of millions of dollars in assets that belonged to convicted Ponzi crook Scott Rothstein will likely be decided today. . . . At a hearing Thursday, federal prosecutors battled attorneys for bankruptcy trustee Herbert Stettin over which side would be better suited to dole out funds to victims. . . . U.S. District Judge James Cohn in Fort Lauderdale, Fla., had tough questions for both Assistant U.S. Attorney Evelyn Sheehan and Sharon Kegerreis of Berger Singerman, who represents Stettin. The judge said he would likely rule by today. . . . But Cohn said a main issue of concern to some victims -- whether the Justice Department would establish a restitution process for all the funds -- was resolved by prosecutors at the hearing.

Brown Rudnick Takes Its Shot at the WaMu Bankruptcy

Zach Lowe, The American Lawyer

07-08-10 -- As we approach the two-year anniversary of Washington Mutual's bankruptcy filing, Brown Rudnick has tossed up a new roadblock to WaMu's plans to emerge from Chapter 11. The firm, representing a bundle of securities holders, filed a 97-page complaint Wednesday accusing WaMu, its buyer (JPMorgan Chase) and the federal government of colluding to deceive and then deprive a group of securities holders who purchased about $4 billion in WaMu securities years before the bank's demise. . . . The complaint is ultra-complicated, but essentially goes like this: The plaintiff investment firms purchased about $1 billion in so-called trust preferred securities issued by a trust WaMu created for the purpose of issuing those securities. They made the investments, the complaint says, under the impression that in the event of a WaMu failure, their securities would be converted into preferred stock in WaMu's parent company. But when the bank collapsed, the complaint says, WaMu, JPMorgan and the federal Office of Thrift Supervision shifted the investors' holdings from the parent company to the bank, which JPMorgan then acquired. The parent company then filed for bankruptcy protection.

FLORIDA

Rothstein Prosecutors Fear Attorney Fees
May Bleed Estate Dry

Feds, estate battle over who would best administer defunct firm's assets

John Pacenti, Daily Business Review

07-02-10 -- With federal prosecutors grabbing for most of the assets left over from Scott Rothstein's massive Ponzi scheme, it remains to be seen whether attorneys involved in his former firm's bankruptcy will reap the millions of dollars in fees originally expected from the case. . . . Federal prosecutors are trying to muscle the bankruptcy attorneys out, and so far they've succeeded. The government holds that it can get more money to the victims of Rothstein's $1.2 billion fraud faster than those administering the remains of Rothstein Rosenfeldt Adler -- without generating the millions of dollars in fees associated with bankruptcy cases. . . . U.S. District Judge James I. Cohn, who sent Rothstein to prison for 50 years, has sided with the government on the few financial decisions he's made, at one point ordering court-appointed bankruptcy trustee Herbert Stettin to turn over $1.6 million in four bank accounts used by Rothstein to perpetrate his scheme.

NEVADA

Lawyer fights for his license in legal practice quagmire

By Jeff German, Las Vegas Review-Journal

07-01-10 -- In August 2008, just a couple of years out of law school, Jorge Sanchez launched what turned into a thriving Bankruptcy Court practice with hundreds of mostly Spanish-speaking clients. . . . At its height in 2009, the Sanchez Law Group, with its 12 employees, was taking on 42 new clients a month and incurring annual operating expenses of more than $600,000, Sanchez said in court documents this week.

HELP KEEP VICTIMS-OF-LAW ON THE WEB
SHOP OUR ADVERTISERS OR CONTRIBUTE NOW

June 2010

ILLINOIS

He Shoots, He Scores: Scottie Pippen Wins $2M Award From Law Firm

By Karen Sloan | The National Law Journal | New York Lawyer

06-30-10 -- It wasn't a legal slam dunk, but a Chicago jury on Monday awarded $2 million to former National Basketball Association star Scottie Pippen in a malpractice suit against a law firm that represented him in a business deal that went bad. . . . Pippen sued the Chicago law firm Pedersen & Houpt for more than $8 million in connection with his ill-fated 2002 purchase of a Gulfstream jet, alleging that the firm did not look out for his financial interests. The lawsuit initially was filed in Cook County, Ill., Circuit Court in 2004, but was stayed for several years while a co-defendant underwent bankruptcy proceedings. Pedersen & Houpt has about 30 attorneys and specializes in counseling start-up companies, real estate developers and high-net-worth individuals.

NEVADA

Court order halts practice of LV lawyer

By Jeff German, Las Vegas Review-Journal

06-29-10 -- The Nevada Supreme Court has issued an order temporarily suspending the license of a Las Vegas bankruptcy lawyer who abruptly shut down his office, leaving some 400 unresolved cases. . . . The order prohibits Jorge Sanchez from practicing law in Nevada or accepting any money from his clients while the State Bar investigates allegations the attorney misappropriated client funds. .

Lawyer in SonicBlue Mess Points Accusing Finger at MoFo

Kate Moser, The Recorder

06-29-10 -- William McGrane has accused yet another firm of conflicted representation in the troubled SonicBlue bankruptcy. . . . McGrane, whose firm represents a group that bought claims against SonicBlue, is now pointing the finger at Morrison & Foerster, which he claims had a "hidden agenda" in the case. . . . In his latest filings, McGrane contends that MoFo sought to protect Pillsbury Winthrop Shaw Pittman because both MoFo and Pillsbury are owners and managers of a malpractice carrier potentially on the hook because of Pillsbury's work for Sonic Blue.

Bankruptcy Judge Scolds Latham Attorney
Over Disclosure Of Fee

Christie Smythe is a staff writer at Law360 Forbes (blog)

06-25-10 -- A bankruptcy court judge has approved pigment maker Tronox Inc.'s request to extend debtor-in-possession financing by three months but chided a Latham & Watkins LLP lawyer representing the lenders for failing to disclose a $250,000 fee for his firm's work. . . . Judge Allan L. Gropper of the U.S. Bankruptcy Court for the Southern District of New York told Latham attorney Richard A. Levy on Thursday to "get out of the business or get out of my courtroom" if he didn't want to reveal the fee in public filings. . . . The desire to keep this number confidential is extremely counterproductive to the bankruptcy process as a whole," Judge Gropper added, saying both creditors and the public have interests in the cost of Chapter 11 proceedings. . . . Along with signing off on the request to extend the financing, which had been scheduled to mature on Thursday, Judge Gropper advised Levy to submit fee-related filings to the public record.

Wines.com, the leading supplier of private label and personalized wines online!

A Victims-of-Law Associate

May 2010

FLORIDA

Fla. Bankruptcy Trustee Quits With More Than $1 Million Missing, Sources Say

Polyana da Costa and John Pacenti, Daily Business Review

05-28-10 -- Another South Florida receiver trusted by judges for years to oversee bankruptcies resigned from hundreds of cases after the U.S. Trustee's Office determined more than $1 million was missing from accounts under her control, sources told the Daily Business Review. . . . Marika Tolz, a Hollywood real estate broker, was confronted by investigators in the trustee's office after financial discrepancies were discovered in her trusteeships, sources say. . . . Tolz has not been charged with a crime. . . . Reached by telephone at her home, Tolz refused to comment and hung up. A woman who answered a phone in her office declined comment and hung up. . . . Tolz is the second long-time bankruptcy trustee or receiver in South Florida to come under scrutiny after money disappeared from court-supervised accounts. Lewis Freeman, a well-known attorney-accountant from Miami, is awaiting sentencing for pilfering $2.6 million from creditors and victims for more than a decade.

MONTANA

Ex-attorney sentenced for defrauding clients in 1987

(AP) Great Falls Tribune

05-28-10 -- A former Billings attorney who was convicted of stealing money from clients in 1987 was sentenced to 1 1/2 years in federal prison for taking about $17,000 from two more clients. . . . Marvin E. "Toby" Alback, 62, was sentenced Wednesday by U.S. District Judge Richard Cebull for wire fraud and bankruptcy fraud. Cebull also fined Alback $5,000, ordered 60 hours of community service and said he would determine restitution later. . . . "I'm just very sorry for what I did," Alback told the court. . . . Alback was charged with taking a mortgage payment from clients who had filed for bankruptcy in 2008 and not forwarding the payment to the bank. . . . Alback eventually repaid the money but caused the couple to pay back payments and late fees to avoid foreclosure, Assistant U.S. Attorney Ryan Archer said.

Lillian Vernon

A Victims-of-Law Associate

WaMu's Chapter 11 Case: Here Come the Shareholders

Zach Lowe, The American Lawyer

05-27-10 -- Rarely does anyone accuse the litigators at Quinn, Emanuel, Urquhart & Sullivan of not being aggressive enough, but that's essentially what attorneys representing Washington Mutual shareholders are saying in asking the judge hearing WaMu's bankruptcy case for permission to investigate JPMorgan Chase's acquisition of WaMu. . . . The shareholders, represented by Susman Godfrey (which replaced Venable in this role), want to pick up the investigation after lawyers for WaMu's estate (Quinn and Weil, Gotshal & Manges) dropped a similar investigation last month, court records show. The investigation, which Quinn and WaMu started in 2009 and pursued aggressively for a time, centers on allegations that JPMorgan torpedoed WaMu's chances of finding another buyer in late 2008 by leaking confidential information and false rumors about WaMu's finances, court records show.

WaMu Chapter 11 Case Is the Bankruptcy That Won't End

Zach Lowe, The American Lawyer

05-26-10 -- The Washington Mutual Chapter 11 case has been contentious from the start, complete with accusations of sabotage. So it's fitting that a global settlement that would pave the way for resolving the mess seems to be perpetually out of reach. . . . The newest twist: A group of senior bondholders who own debt from WaMu's banking unit announced Monday that it is opposing a proposed settlement between the bankrupt estate, the Federal Deposit Insurance Corp., other bondholders, and WaMu's new owners at JPMorgan Chase, according to Reuters and this release from Boies, Schiller & Flexner attorneys representing the dissident bondholders.

Receiver Moves to Distribute $200 Million to Madoff Investors

Daniel Wise, New York Law Journal

05-26-10 -- The court-appointed receiver for two funds created by hedge fund operator J. Ezra Merkin filed court papers (pdf) Monday seeking authorization to make an interim distribution of $200 million to the funds' 278 investors. Merkin's investors lost $1.2 billion because he placed their funds with Bernard L. Madoff, who is serving a prison term of 150 years for creating the largest Ponzi scheme in history, according to a lawsuit brought by the New York attorney general's office. . . . Under the $200 million distribution, if approved by Manhattan Supreme Court Justice Richard B. Lowe III, who is presiding over the attorney general's lawsuit, People v. Merkin, 450879/09, the investors would on average recoup approximately one-third of the losses they suffered in connection with funds Merkin turned over to Madoff, according to claims the receiver, Bart M. Schwartz, has filed in connection with the Madoff bankruptcy (See Schwartz's affirmation).

FLORIDA

Rothstein Victims Duke It Out in Bankruptcy Court

$470 million in claims filed so far

Julie Kay, Daily Business Review

05-26-10 -- Fights are starting to erupt among bankruptcy creditors victimized by swindler Scott Rothstein's Ponzi scheme. . . . Two weeks after the deadline for victims to file claims against Rothstein's defunct law firm in his $1.2 billion fraud, the largest single creditor -- Ira Sochet Inter Vivos Revocable Trust -- requested an extension Tuesday from U.S. Bankruptcy Judge Raymond Ray. . . . But the request from Miami attorney Lawrence Gordich was staunchly opposed by Jim Silver of Conrad Scherer, the Fort Lauderdale, Fla., firm heading the creditors' committee with an estimated $113 million loss. . . . Sources say the flare-up reflects long-standing tension on the committee and foreshadows a major battle brewing between direct investors and feeder funds. All are fighting over the same pot of money. Claims totaling almost $470 million were filed by the May 12 deadline.

A Victims-of-Law Associate

NEW YORK

Thelen Bankruptcy Estate Seeks Approval of $900K Settlement

Nate Raymond, New York Law Journal

05-25-10 -- The estate of the defunct law firm Thelen is seeking a bankruptcy judge's approval of a $900,000 settlement of a state court action by State Street Bank and Trust Company. The payment would come from Thelen's insurer and resolve all claims against the law firm in the litigation pending in Manhattan Supreme Court, according to a motion filed earlier this month by Yann Geron, a partner at Fox Rothschild who is the trustee for Thelen's estate. A hearing is scheduled for June 2 before Southern District of New York Bankruptcy Judge Allan Gropper. . . . "If the court approves the settlement, we believe the Thelen estate will be glad to have the matter behind it," said Michael Feldberg, a partner at Allen & Overy who represents Thelen in the case, AG Capital Funding Partners v. State Street Bank and Trust Company, 601134/2002.

FLORIDA

Former RRA Partner Holds Out Hope for Settlement in Firm Bankruptcy

Julie Kay and John Pacenti, Daily Business Review

05-12-10 -- A confidential settlement between Scott Rothstein's former equity partner Stuart Rosenfeldt and the court-appointed bankruptcy trustee could be reached by week's end. If not, Rosenfeldt said he will hire a bankruptcy attorney. . . . He appeared cheerful in court Tuesday and represented himself at a hearing before U.S. Bankruptcy Judge Raymond Ray. Chuck Lichtman, attorney for bankruptcy trustee Herbert Stettin, said he held off on deposing Rosenfeldt in the hopes of reaching a settlement. . . . "We've been engaged in settlements talks ... and should know in the next couple days whether it happens," said Lichtman, a partner with Berger Singerman in Fort Lauderdale. "We've had an extended discussion in our office." . . . After the hearing, Rosenfeldt told the Daily Business Review he is hopeful for a settlement but declined to give any details on a dollar value. . . . "It's an amount that I can afford to live with," he said.

Court Agreement Ends General Growth Bankruptcy Bid Battle

Robert Carr, The American Lawyer

05-10-10 -- Ending one of real estate's most protracted takeover battles, Judge Allan Gropper, in the U.S. Bankruptcy Court for the Southern District of New York, agreed Friday to allow Chicago-based General Growth Properties, a mall real estate investment trust, to partner with Brookfield Asset Management of Toronto in an $8.5 billion reorganization plan. . . . The decision sets Brookfield as the "stalking horse" bidder, and ends an aggressive takeover attempt by GGP's main retail rival, Simon Property Group of Indianapolis. Simon announced a last-ditch offer late Thursday night of $20 a share to take over GGP, even though General Growth hasn't seen that price since late 2008. GGP's stock closed Friday at $14.13 a share. . . . Brookfield has pledged to help bring GGP out of bankruptcy by purchasing GGP stock at $10.50 per share, resulting in a $6.5 billion equity investment and $2 billion capital backstop offer, which includes assistance from Pershing Square Capital Management and Fairholme Funds. The Brookfield deal comes with several million dollars in warrant fees to GGP, though Brookfield has agreed to postpone some of the costs.

Madoff Judge Awards Another $25 Million in Fees

Noeleen G. Walder, New York Law Journal

05-10-10 -- A federal judge has awarded trustee Irving H. Picard and his team of lawyers liquidating Bernard L. Madoff's investment firm some $24.6 million in interim counsel fees. Southern District of New York Bankruptcy Judge Burton Lifland on Thursday awarded about $672,000 in fees to Picard and $23.9 million in fees to Baker & Hostetler for Oct. 1 through Jan. 31. All told, the judge has awarded Picard and his attorneys about $62 million in fees.

3rd Circuit Agrees to Mull Bankruptcy Discharge's Impact on Injury Claims

Shannon P. Duffy, The Legal Intelligencer

05-10-10 -- The 3rd U.S. Circuit Court of Appeals could be poised to overturn one of its most widely criticized precedents involving how courts decide whether and when the discharge of all claims in a corporate bankruptcy reorganization plan should act as a bar to future personal injury claims. . . . The 1984 decision in Matter of M. Frenville Co. was called into question in a recent appeal, Jeld-Wen Inc. v. Van Brunt, that could have profound consequences for asbestos litigation. . . . In Frenville, the 3rd Circuit held that a "claim" does not "arise" for bankruptcy court purposes until it has "accrued" under state law. . . . But as Jeld-Wen sees it, "Frenville's reliance on state law to determine when a claim arises runs contrary to the Bankruptcy Code."

New Associate!!! May 2010 Dr. Scholl's Shoes

A Victims-of-Law Associate

FLORIDA

Prosecutors, Bankruptcy Trustee Hit Stalemate Over RRA Assets

John Pacenti, Daily Business Review

05-04-10 -- Where Scott Rothstein's $1.2 billion Ponzi scheme ended and his defunct law firm began is at best a gray area. . . . Prosecutors asked U.S. District Judge James Cohn last month to execute a vast forfeiture plan, seeking all ill-gotten gains tied to Rothstein in the form of cash, real estate or material goods. . . . In the other corner, attorneys for bankruptcy trustee Herbert Stettin, who is overseeing the remains of the Rothstein Rosenfeldt Adler law firm, repeatedly have said the government's reach is too broad, and something should be left over. . . . Stettin's legal team disagrees with observations from stalwarts of the South Florida legal community, such as Tew Cardenas co-founder Thomas Tew, who say the firm might be left with skeletal remains to pay vendors with outstanding bills, clients with claims against the law firm and even themselves and other professionals for the work they have performed at Stettin's behest.

Lehman Bankruptcy Charges: $2,100 for Limo Rides,
$48 to Leave a Message

By Debra Cassens Weiss, ABA Journal

05-03-10 -- Weil, Gotshal & Manges has billed more than $164 million for its work as lead counsel so far on the Lehman Brothers bankruptcy, including more than $500 a day for limo drivers, billed for services in the month’s after Lehman’s collapse. . . . But new limits are now in place due to the efforts of Kenneth Feinberg, the New York Times reports. Known as the “pay czar” who is monitoring banks that received bailout money, Feinberg also has a role in the Lehman Brothers bankruptcy as the court-appointed fee monitor. His counterpart in the General Motors bankruptcy is Brady Williamson. . . . The Times detailed the work of Feinberg and Williamson in a story that also delved into the charges in the Lehman Brothers and other bankruptcies, including $2.54 charged by the Huron Consulting Group for “gum in airport.” . . . Charges by law firms in the two bankruptcy cases included more than $2,100 for late-night rides home by one partner at Jones Day, and $685 a night for one Weil lawyer’s week-long stay at the Sherry-Netherland hotel in Manhattan, the story says. Other charges by unnamed consultants and firms included more than $263,000 for photocopies in four months and $48 to leave one message.

WASHINGTON

Disbarred Gig Harbor attorney sentenced in fraud scheme

Posted by John de Leon, Seattle Times

-- From Times staff reporter Mike Carter:

05-01-10 -- A disbarred Gig Harbor attorney has been sentenced to prison for three years for mail fraud stemming from a fraudulent debt-elimination promotion. . . . Bruce Hawkins, 50, took money from more than 1,000 debtors, telling them he could eliminate their credit-card debt between 2002 and 2005, according to the U.S Attorney's Office. He told his clients that tax laws prevented national banks from extending credit and that they didn't have to repay their debts, and then sent them to "arbitors" who he paid to issue a meaningless award on the debtor's behalf. Many of the debtors wound up in bankruptcy after learning the scheme was useless, the U.S Attorney's Office said.

A Victims-of-Law Associate

April 2010

FLORIDA

Tearful Ex-General Counsel Details Huge Ponzi Discovery

David Boden gives testimony in all-day deposition concerning fraud committed by Scott Rothstein

Julie Kay, Daily Business Review

04-30-10 -- Scott Rothstein's former law firm general counsel cried Thursday as he recalled how he discovered his boss had committed a fraud of epic proportions. . . . David Boden, who worked for Rothstein Rosenfeldt Adler for 18 months before it imploded last November, testified in a deposition about discovering the $1.2 billion Ponzi scheme. He was the subject of an all-day deposition by Fort Lauderdale attorney Chuck Lichtman of Berger Singerman, which represents trustee Herbert Stettin in the firm's bankruptcy. . . . Boden, 48, cried several times -- and stopped the deposition at one point to compose himself -- as he recalled finding hundreds of millions of dollars were missing from the firm's TD Bank accounts. He said he was told the accounts were frozen Oct. 30, shortly after receiving notice from Richard Pearson, RRA's investment broker, that he had not been paid and would no longer do work for RRA.

Bankruptcy Judge Rejects Dreier Agreements

Noeleen G. Walder, New York Law Journal

04-29-10 -- The government and the trustees charged with liquidating the estate of disbarred attorney Marc S. Dreier and his defunct 250-attorney law firm hit a stumbling block Wednesday when a federal bankruptcy judge said he could not sign off on two agreements reached between the parties after months of negotiation. . . . The first agreement required GSO Capital Partners, which invested in fake promissory notes peddled by Dreier, to pay about $9.5 million to the trustees. In return, the trustees agreed to release GSO from claims relating to payments it received as a result of the fraud. The agreement also barred third-party claims against GSO "releasees" that related to "Marc Dreier, Dreier LLP, and the Note Fraud Funds." . . . A second but related pact provides that the government would release nearly 100 artworks worth as much as $3 million, which have not been traced to Dreier's crimes, to Chapter 11 trustee Sheila Gowan. In turn, Gowan, of Diamond McCarthy, had vowed to refrain from contesting certain forfeited funds, including some $31 million that GSO will turn over to the government.

TENNESSEE

Lawyer receives 2-year suspension

Dyersburg State Gazette

04-28-10 -- The Tennessee Supreme Court has suspended the law license of Dyersburg attorney Thomas H. Strawn Jr. for two years. . . . Strawn pleaded guilty April 20 to neglecting his clients' Chapter 13 bankruptcy cases. The Supreme Court's Board of Professional Responsibility (BPR) announced the suspension Monday night. . . . The neglect charges surfaced nearly a year ago. The bankruptcy trustee's office told the BPR that Strawn failed to competently and adequately represent clients in seven bankruptcy cases. The trustee's May 15 petition claimed Strawn did not timely resolve issues that arose in the bankruptcy cases and failed to appear at scheduled hearings. The bankruptcy trustee's office said it e-mailed, telephoned and otherwise attempted to contact Strawn but failed to receive sufficient response to resolve the matters. Without a resolution, the bankruptcy court dismissed all seven cases on Jan. 29, 2009.

GENERAL

Lehman Brothers Bankruptcy Bill Approaches $750 Million -- and Counting

Zach Lowe, The American Lawyer

04-23-10 -- The latest Lehman Brothers bill is in, and the total dollar amount the bankrupt estate has paid out to financial advisers and law firms is approaching $750 million and might possibly be on its way to $1 billion, according to documents Lehman filed Thursday with the SEC and this Bloomberg article. . . . The rate of law firm billing has actually slowed down a bit since the last time we checked. Through January 2010, law firms had billed about $311 million of the $649 million total paid out to advisers since Lehman filed for Chapter 11 protection on Sept. 15, 2008. Over February and March of this year, the total bill jumped by about $82 million to $731 million, with law firms accounting for just $20 million of the increase in those two months, according to the SEC documents. The total law firm bill is now up to $331 million. . . . The biggest biller, to no one's surprise, continues to be Lehman's lead debtor counsel at Weil, Gotshal & Manges, which has billed the estate just short of $165 million since the bankruptcy filing. As we reported in February, Weil's bill breaks down to about $300,000 per day since Lehman's bankruptcy filing. Weil billed about $15 million in January and February combined, which breaks down to about $255,000 per day over those two months.

2nd Circuit Upsets Bankruptcy Sanction of Developer Linked to Marc Dreier

Mark Hamblett, New York Law Journal

04-20-10 -- A bankruptcy judge's decision to sanction a prominent real estate developer who hired Marc S. Dreier in 2004 in a scheme to meddle with a rival's bankruptcy has been reversed by a federal appeals court. . . . The 2nd U.S. Circuit Court of Appeals said that Bankruptcy Court Judge Burton R. Lifland lacked the authority to order $334,583 in sanctions against developer Sheldon Solow, his chief operating officer at Solow Realty & Development Co., Dreier and others in the bankruptcy case of Peter S. Kalikow, a developer and former head of the Metropolitan Transportation Authority. . . . The circuit made that ruling in In re Kalikow, 08-5268-bk, an appeal decided by Judges Roger J. Miner, Reena Raggi and Peter W. Hall.

FLORIDA

Bankruptcy Trustee Settles With Former Rothstein Firm Lawyers Over Future Fees

Julie Kay, Daily Business Review

04-19-10 -- The trustee in the bankruptcy case of Ponzi operator Scott Rothstein's defunct law firm has settled disputes with seven attorneys over future legal fees from cases they handled while employed at Rothstein Rosenfeldt Adler. . . . In motions filed late Thursday, trustee Herbert Stettin seeks approval of settlement agreements with Russell Adler and six attorneys who banded together when they left RRA: Gary Farmer, Steven Jaffe, Matthew Weissing, Brad Edwards, Mark Fistos and Seth Lehrman. . . . The agreements submitted to U.S. Bankruptcy Judge Raymond Ray for approval provide for the trustee to get a percentage of recoveries on unresolved cases the former RRA attorneys are handling for clients in the door before Rothstein's $1.2 billion fraud collapsed last Nov. 1. . . . No dollar amounts are listed, but Farmer said the total uncollected fees could exceed $10 million. That would include several class action cases and qui tam actions his new firm is working on, including cases against NationsRent, a home health care agency and Palm Beach millionaire Jeffrey Epstein, who has been sued for allegedly abusing teenage girls.

Judge Freezes Assets of Rothstein Financial Adviser

Julie Kay, Daily Business Review

04-19-10 -- A Fort Lauderdale, Fla., bankruptcy judge on Thursday froze up to $33 million in assets held at one time by a financial adviser with ties to convicted Ponzi schemer Scott Rothstein. . . . U.S. Judge Raymond Ray approved the request from attorneys for Herbert Stettin, bankruptcy trustee for Rothstein’s defunct law firm, for a preliminary injunction against Michael Szafranski and his wife, Elana Strum. The Bay Harbor Islands adviser allegedly acted as the independent verifier for Rothstein’s phony settlements at the heart of his $1.2 billion fraud. . . . Szafranski’s attorney, Chris Berga of Lydecker Lee Berga & de Zayas in Miami, argued against the injunction, saying he had only a day or so to respond to the trustee’s emergency motion. He also said he wanted to call Stettin to testify and asked for a continuance. . . . “We’ve had 24 hours to review the documents,” Berga said. “That’s not much time for such a drastic remedy.”

Wachtell and Paul Weiss Advise on New Bid for Bankrupt General Growth Properties

Brian Baxter, The American Lawyer

04-15-10 -- Simon Property Group, the largest owner of shopping malls in the U.S., has teamed up with hedge fund Paulson & Co. for a new offer for bankrupt rival General Growth Properties. And plenty of Am Law 100 firms are already involved. . . . Wachtell, Lipton, Rosen & Katz corporate partners Adam Emmerich and Benjamin Roth led a team from the firm advising Indianapolis-based Simon when the mall operator made its $10 billion unsolicited offer in February for GGP, the second-largest mall owner in the country. . . . But GGP nixed that offer as too low. The Chicago-based REIT, which entered Chapter 11 a year ago, embraced a reorganization plan sponsored by Brookfield Asset Management, hedge fund Pershing Square Capital Management and fund manager Fairholme Capital Management.

Madoff Trustee Reports $1.5 Billion in Assets Recouped

Noeleen G. Walder, New York Law Journal

04-13-10 -- The trustee charged with liquidating the estate of Bernard L. Madoff's investment firm has recovered some $1.5 billion in assets and hopes to begin distributing the money to customers before the end of the year, according to court papers filed Friday. . . . In an 83-page interim report submitted to Southern District Bankruptcy Judge Burton R. Lifland, Irving H. Picard of Baker & Hostetler reported that "notwithstanding the monumental and unprecedented task faced by the Trustee, substantial progress" has been made in "reviewing and determining customer claims." . . . As of March 31, Picard has allowed 2,011 of 12,249 claims, and committed $668 million in cash advances from the Securities Investor Protection Corporation, the "largest amount of SIPC funds in any one SIPA liquidation proceeding." . . . In addition to bringing 14 avoidance actions aimed at recouping more than $14.8 billion from feeder funds, Picard has uncovered a "complex web of tangled investment structures that fed money into" Madoff's Ponzi scheme and has served more than 75 subpoenas in 20 jurisdictions.

Heller Creditors Pick 11-Lawyer McGrane Firm for Big Suit

Petra Pasternak, The Recorder

04-08-10 -- San Francisco litigation firm McGrane Greenfield may be put in charge of one of the most important pieces of litigation in the Heller Ehrman bankruptcy. . . . The unsecured creditors' committee has asked bankruptcy Judge Dennis Montali to approve the hire of McGrane Greenfield for a pending case against Bank of America and Citibank. Under the proposed contract, the 11-lawyer firm would be paid $1 million up front, plus a contingency fee worth 5 percent of the net benefit to the estate if they win, Monday court filings show. . . . A hearing on the motion is scheduled for Tuesday. . . . As special litigation counsel, McGrane Greenfield, which specializes in complex business litigation and bankruptcy matters, would pursue the suit the committee filed against the banks last April. It seeks the return of $58 million the dissolved firm paid the banks in a window of time around its December 2008 Chapter 11 filing, plus interest.

Feds, Rothstein Firm Trustee in Tug of War Over Assets

Jordana Mishory, Daily Business Review

04-02-10 -- The bankruptcy trustee for defunct law firm Rothstein Rosenfeldt Adler contends the government has once again overstepped its bounds by trying to control additional assets that belonged to convicted fraudster Scott Rothstein. . . . On Monday, the U.S. Attorney's Office filed a motion seeking a protective order be entered to preserve new assets, including four Rothstein Rosenfeldt Adler bank accounts at TD Bank containing almost $120,000 and "all property, other than 'funds'" voluntarily turned over to the government since news broke in late October that Rothstein was running a settlement scheme out of his law firm. . . . But trustee Herbert Stettin argued that the government could not lay claim to assets that don't belong to Rothstein and were not included for forfeiture in the original information, calling the motion "particularly egregious."?

HELP KEEP VICTIMS-OF-LAW ON THE WEB
SHOP OUR ADVERTISERS OR CONTRIBUTE NOW

March 2010

Weil Gotshal Bills Lehman $1,000 Per Hour for Lawyers

By Linda Sandler, Bloomberg, BusinessWeek

03-31-10 -- Lehman Brothers Holdings Inc.’s lead bankruptcy law firm, Weil Gotshal & Manges LLP, bills the bankrupt investment bank as much as $1,000 an hour for its top lawyers’ time overseas, and $990 an hour for U.S. lawyers. . . . The rates were set Jan. 1, Weil Gotshal said in court papers filed yesterday in U.S. Bankruptcy Court in Manhattan. The New York-based law firm collected $157.5 million from Lehman during a 17-month period ending last month, according to a regulatory filing. . . . Lehman, once the world’s fourth-biggest investment bank, is liquidating to pay creditors. Its payments to advisers haven’t faced major objections such as those in the case of bankrupt automaker Chrysler LLC, which is using U.S. Treasury loans to wind itself down.

Bankruptcy Lawyers Troubled by Recent High Court Ruling

Thomas B. Scheffey, The Connecticut Law Tribune

03-19-10 -- Bankruptcy lawyers will need to remain cautious about what sort of advice they offer clients, following a ruling by the U.S. Supreme Court last week. . . . The justices ruled the portion of the 2005 bankruptcy reform act that bars lawyers from advising clients to take on "any debt" is constitutional, though it may be less restrictive than first thought. . . . Still, lawyers are unhappy at being muzzled in any way by a law that they don't believe should apply to them. "Most attorneys were hoping [the Supreme Court] would strike down as unconstitutional the provision about not counseling your client to take on any debt, and I found it disappointing that they didn't do that," said Matthew K. Beatman, a partner in the Bridgeport, Conn., bankruptcy boutique firm of Zeisler & Zeisler. . . . He did, however, call it "helpful" that the Court explained that the prohibition refers to abusing the bankruptcy law by running up debt that can't be collected by creditors, and doesn't apply to lawful actions.

NY Firm, Co-Counsel Returning Some Fees in Bankruptcy

By Brian Baxter | The American Lawyer | New York Lawyer

03-19-10 -- The bankruptcy case of Miami developer Cabi Downtown has been anything but smooth since the company filed for Chapter 11 last August. . . . Within months of the filing, Bank of America, which holds a $256 million construction loan on a Cabi condo project built on the site of the former Everglades Hotel, moved to end the bankruptcy and foreclose on the property. . . . While the bank turned to lawyers from Kaye Scholer and Shutts & Bowen to handle bankruptcy litigation against Cabi, that work took an unexpected turn as the two firms agreed to pay Cabi’s legal fees in connection with an order to show cause after the firms were criticized for their conduct in the case.

Confidentiality Issues Mushroom in the Tribune Bankruptcy

Zach Lowe, The American Lawyer

03-17-10 -- The Tribune Co. bankruptcy keeps producing juicy legal storylines: a bench smackdown of Sidley Austin's proposed $1,100 per hour rates, a debate over expensive fee examiners, a cameo from Warren Beatty and, most central to the case, a possible lawsuit against the banks that engineered the leveraged buyout that ruined Tribune. . . . Now, that last issue has produced a new twist: possible sanctions against a bondholder after its law firm, Brown Rudnick, mistakenly included confidential papers in a public filing, court records show. Martin Siegel, a Brown Rudnick partner, says the mistake was "inadvertent," and that the firm has pulled the offending material from its filing. But Siegel says his firm will challenge the motion, filed by JPMorgan Chase and its lawyers at Davis Polk & Wardwell, to sanction Brown Rudnick's client (a bondholder called Wilmington Trust Co.). Possible sanctions include a ban on Brown Rudnick's client from accessing a trove of critical confidential documents, according to a source familiar with the matter.

Lehman Estate Files Restructuring Plan

Brian Baxter, The American Lawyer

03-17-10 -- It's not quite Old Carco, but bankruptcy lawyers for Lehman Brothers have filed a reorganization plan that calls for the creation of Lamco, an asset-management subsidiary carved out of Lehman that will help put an end to the largest Chapter 11 case in U.S. history. . . . According to the 93-page plan, filed Monday by Lehman's lead bankruptcy lawyers at Weil, Gotshal & Manges, Lamco will manage real estate, private equity and derivatives assets held by the defunct investment bank in order to sell them off at a premium to generate proceeds for Lehman creditors. . . . More than $830 billion in claims have been filed against Lehman, Bloomberg reports; the company says many of those claims are duplicative. Lehman is still calculating the assets available that it will pool to pay creditors while working to resolve various claims, Bloomberg reports, putting the debt of Lehman affiliates at roughly $115 billion.

WaMu, JPMorgan Agree to $6 Billion Settlement

Zach Lowe, The American Lawyer

03-15-10 -- Major developments out of federal bankruptcy court in Delaware: Washington Mutual's estate has reached a proposed settlement with JPMorgan Chase and federal regulators that will result in the return of $4 billion in deposits and nearly $2 billion in other cash that will be used to pay WaMu creditors, according to lawyers involved in the matter. . . . As part of the proposed settlement, which still requires bondholder approval, the bankrupt WaMu estate agreed not to pursue claims against JPMorgan and the Federal Deposit Insurance Corp. over the bank's collapse. . . . As you'll recall, the FDIC scooped up the bank in late 2008, placed it in receivership and sold its assets to JPMorgan for $1.9 billion. As we've previously reported, WaMu's estate and its special litigation team from Quinn Emanuel Urquhart & Sullivan claimed JPMorgan and several of its top executives, including the bank's chief, Jamie Dimon, conspired to lower WaMu's sale price by leaking false information about WaMu's finances to federal regulators and potential rival bidders.

Lehman Report Shows Ex-GC's Fight to the Bitter End

Amy Miller, Corporate Counsel

03-15-10 -- Thomas Russo knows a thing or two about shepherding struggling financial companies through chaotic times. The former top lawyer for Lehman Brothers Holdings Inc. took on the unenviable task of becoming general counsel for embattled American International Group Inc. in February. . . . Now Russo's old life as head lawyer of the collapsed Lehman Brothers is in the news again with the release of a 2,200-page bankruptcy examiners' report. The New York Times called it the "Wall Street equivalent of a coroner's report" because it lays out in minute detail how Lehman Brothers used accounting gimmicks to hide the bad investments that led to its demise. . . . Russo and Lehman's legal department weren't blamed for the accounting chicanery, according to the report. But it shows that they were involved in negotiations with other financial institutions as the bank fought for its survival.

NEW YORK

Court: Rights to Tavern on the Green Name
Belong to New York City

Formerly the highest-grossing independently run restaurant in the United States, the restaurant remains mired in bankruptcy proceedings

Noeleen G. Walder, New York Law Journal

03-11-10 -- A federal judge ruled Wednesday that New York City had presented "compelling evidence" that it owned the right to the name Tavern on the Green. . . . The decision comes more than two months after the famous Central Park eatery closed its doors on Dec. 31. It caps a bitter battle between the city and descendants of famed restaurateur Warner LeRoy, who licensed the right to run Tavern on the Green in the 1970s. . . . Tavern on the Green, L.P., and LeRoy Adventures Inc., claimed a 1981 "incontestible" trademark registration conclusively established its right to the name.

Lehman to Judge: Make the Examiner's Report Public

Zach Lowe, The American Lawyer

03-10-10 -- Lehman Brothers and its lawyers at Weil, Gotshal & Manges sent a clear message this week to the judge hearing Lehman's bankruptcy case: Make public the full report about Lehman's demise. In a motion filed Monday by Weil's Harvey Miller, Lehman says it has cooperated fully with the special examiner investigating the bank's failure and has turned over more than 20 million pages of e-mail. (The motion is available for download below.) . . . The examiner in the case, Jenner & Block chairman Anton Valukas, was given full subpoena power to investigate Lehman's epic fall, as previously reported in this space. Issues of particular interest include whether Barclays got a sweetheart deal when it purchased Lehman's North American operations days after Lehman filed for bankruptcy; how Lehman shifted billions from unit to unit hours before its bankruptcy filing; and whether JPMorgan Chase acted appropriately as Lehman's main lender, according to Bloomberg and our prior reporting.

UNITED STATES SUPREME COURT

High Court Finds Lawyers and Their Advice Covered by Bankruptcy Reform Law

Marcia Coyle, The National Law Journal

03-09-10 -- Consumer bankruptcy lawyers are "debt relief agencies" under a 2005 federal bankruptcy law and restrictions on the type of advice they can give clients are constitutional, the U.S. Supreme Court ruled on Monday. . . . In a challenge brought by a Minnesota law firm, the justices unanimously held that the plain language of the Bankruptcy Abuse Prevention and Consumer Protection Act clearly indicates that lawyers function as debt relief agencies when they provide bankruptcy help to consumers covered by the law. The 2005 law was enacted to combat abuse of the bankruptcy system. . . . The Supreme Court case, Milavetz, Gallop & Milavetz v. U.S., actually raised three issues for the justices: . . . Whether lawyers are debt relief agencies. . . . Whether a provision prohibiting lawyers from advising clients to incur more debt "in contemplation" of filing for bankruptcy violates First Amendment free speech guarantees. . . . Whether provisions requiring a debt relief agency to include the sentence "We are a debt relief agency," or one substantially similar, in all advertisements mandate unconstitutional compelled speech. . . . The 8th U.S. Circuit Court of Appeals had ruled in favor of the law firm only on the second issue -- the restriction on lawyers' advice. That ruling prompted a cross-petition for Supreme Court review by the government.

Bankruptcy Judge Clears Way to Liquidate Tavern on the Green's Assets

Noeleen G. Walder, New York Law Journal

03-09-10 -- Lamenting the amount of time wasted in the Chapter 11 case of Tavern on the Green, a federal judge last week cleared the way for the liquidation of the famed eatery's remaining assets. In papers filed last month, the committee of unsecured creditors of Tavern on the Green Limited Partnership accused New York City of "materially interfer[ing] with the Debtors' effort to maximize the value of their estates" and "caused the estates needlessly to incur millions of dollars in administrative expenses." . . . The committee, which said the estate owed some $3 million in "professional" fees, told Southern District of New York Bankruptcy Judge Allan L. Gropper that the only way to efficiently administer the estate was to convert the Chapter 11 proceedings to a Chapter 7 liquidation. The city countered that the conversion motion was a "ploy" and accused the committee of spending "enormous amounts of money in a very short period of time without producing any tangible results."

US top court upholds lawyer bankruptcy advice law

At issue: incurring more debt before bankruptcy filing

* Law challenged for violating free-speech rights

* Government lawyers say law only targeted abuses

By James Vicini, Reuter

03-08-10 -- The Supreme Court on Monday unanimously upheld part of the U.S. bankruptcy law that bars attorneys from advising clients to take on more debt while considering a bankruptcy filing. . . . The opinion by Justice Sonia Sotomayor reverses a ruling by a U.S. appeals court that a provision of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was unconstitutionally broad and violated free-speech rights. . . . The provision prohibits bankruptcy professionals like attorneys from advising their clients to incur more debt, such as mortgages or student loans, before filing for creditor protection. . . . The ruling is a victory for the U.S. Justice Department, which defended the provision. It said Congress adopted the law fight abuse of the bankruptcy system encouraged by lawyers.

Big Bankruptcies' Big Fees Raising Questions

Brian Baxter, The American Lawyer

03-05-10 -- The Chapter 11 cases of copper miner Asarco and casino operator Station Casinos have been a gold mine for bankruptcy lawyers. Baker Botts broke the $100 million billable mark in the five-year-old Asarco case last August, and the legal bills in the seven-month-old Station Casinos case are approaching $20 million for a dozen law firms. But future fees might not be paid out so easily as the bills have come under increasing scrutiny. . . . We've taken a close look at fee filings in both cases. Hourly billing rates for attorneys, when available, are listed in parentheses. . . . Station Casinos / When we first reported on the Chapter 11 filing of Station Casinos last summer, it struck us as one of the more twisted and complex bankruptcy cases around. And not for nothing. Since Station filed for bankruptcy on July 28, nearly a dozen law firms have landed some piece of the work for the struggling Las Vegas-based casino operator. Station has paid out nearly $20 million in legal bills in less than eight months.

Orrick Partner Sued in Contentious Chapter 11 Case

Zach Lowe, The American Lawyer

03-05-10 -- The bankruptcy case of Thornburg Mortgage has already involved an anonymous letter, allegedly stolen laptops, lawsuits against the company's former top executives and law firms bowing out of the case for various reasons. Thursday brought a new development: a suit, brought by the U.S. Trustee now handling matters for the debtor, charging Orrick, Herrington & Sutcliffe partner Karen Dempsey with being part of an alleged conspiracy to defraud Thornburg and divert the company's money to a new entity started by ex-Thornburg management. . . . The allegations are too numerous to spell out in full here (the complaint is available for download below), but the gist is this: The trustee, Joel Sher of Shapiro, Sher, Guinot & Sandler, charges four former Thornburg executives with using various means to send millions of dollars from the debtor company to their new company, SAF Financial, according to court records. Orrick's Dempsey allegedly helped the former execs along the way by, among other things, advising them on how to set up SAF and amend the Thornburg management agreement in a way that allowed for the payment of management fees and bonuses from Thornburg to the executives on a faster timetable -- and outside of bankruptcy court. The executives are separately charged with stealing confidential Thornburg property and instructing some Thornburg employees to do work for SAF, court records show. (Sher did not respond to two calls seeking comment.)

Bankruptcy Judge Backs Madoff Trustee's Payout Calculations

Noeleen G. Walder, New York Law Journal

03-02-10 -- A bankruptcy judge Monday upheld a trustee's method of adjudicating the claims of investors who fell prey to Bernard L. Madoff's massive Ponzi scheme. . . . Under Trustee Irving H. Picard's "cash-in/cash out" approach, investors who withdrew more money from their Madoff accounts than they deposited ("net winners") will not be compensated while investors who withdrew less than they put in ("net losers") would be compensated by the Securities Investor Protection Corp. . . . The method has been hotly contested by numerous investors, who argue that payouts should be based on their Nov. 30, 2008, customer statements from Bernard L. Madoff Investment Securities LLC, the last statement they received before Madoff, 71, was arrested for his multibillion dollar fraud.

Shockingly NEW!!!

Attorneys & Judges Involved in Sexual Misconduct

February 2010

NEW HAMPSHIRE

Bankruptcy case stretches law firm

By Daniel Barrick, Monitor staff

02-26-10 -- Since two Lakes Region investment firms abruptly shut their doors last year, dozens of former investors have claimed the closures caused them severe financial strain. Add another name to that list: the law firm handling the companies' bankruptcy case. . . . Donchess & Notinger, the Nashua law firm appointed to help the trustee overseeing the bankruptcy of Financial Resources Mortgage and CL&M, said in court filings yesterday that the case has "created financial hardship for the firm." So far, the firm has rung up nearly $250,000 in legal fees and expenses from the case, according to the court filings. . . . Donchess & Notinger yesterday asked the judge in the case to authorize the payment of half that amount. But it could be a while before that money is forthcoming. Both Financial Resources Mortgage and CL&M, which officials say managed a massive Ponzi scheme, closed their doors with virtually no cash in their accounts. And since the companies closed in early November, Donchess & Notinger have recovered just $60,000 in loan payments from some of the companies' borrowers and their former law firm. . . . The firm "has spent a lot of time working through the tangled web of transactions and transfers set up by CL&M and (Financial Resources Mortgage) to further its Ponzi scheme," the firm's request said.

FLORIDA

Scott Rothstein's Former Partners Still Refuse to Disclose E-Mail Passwords

Julie Kay, Daily Business Review

02-24-10 -- Two former partners at Scott Rothstein's defunct law firm have refused to turn over access to their off-site computer and e-mail files and will face a court order to force them to do so. . . . U.S. Bankruptcy Judge Raymond Ray, who is overseeing the Rothstein Rosenfeldt Adler bankruptcy and wind-down, said at a hearing Tuesday that he will compel Russell Adler and Robert Buschel to surrender their passwords to the RRA firm's e-mail and computer file system administered by Burbank, Calif.-based Qtask. The request was made by bankruptcy trustee Herbert Stettin. . . . Berger Singerman attorney Chuck Lichtman, who represents Stettin, said he sought the order to look for potential evidence of Rothstein's $1.2 billion Ponzi scheme and hidden assets. He guessed federal prosecutors also would be interested in reviewing the files once he has obtained them.

MONTANA

Former attorney pleads guilty to fraud

Associated Press, Great Falls Tribune

02-24-10 -- A former Billings attorney who was sentenced to prison for stealing money from clients in 1987 has admitted doing it again. . . . Marvin E. “Toby” Alback pleaded guilty Tuesday to wire fraud and bankruptcy fraud for misappropriating money from clients for his own use. He appeared before U.S. Magistrate Judge Carolyn Ostby. . . . Prosecutors say Alback took a mortgage payment from a client in a bankruptcy case, along with a $557 tax refund check that should have gone into the bankruptcy estate.

FLORIDA

Tension Flares Over Distribution of Seized Rothstein Assets

Jordana Mishory, Daily Business Review

02-23-10 -- Victims of convicted fraudster Scott Rothstein's $1.2 billion Ponzi scheme are elbowing each other to get the first crack at seized assets. And now, federal prosecutors and the bankruptcy trustee are going at it as well.

The U.S. Attorney's Office and Herbert Stettin, the bankruptcy trustee dismantling defunct law firm Rothstein Rosenfeldt Adler, are fighting over restitution plans for an estimated 350 victims of Rothstein's fraud. . . . The two sides met Feb. 12 in hopes of finding a way to work together. But attempts at behind-the-scenes collaboration immediately sputtered, according to a government motion Friday decrying "inflammatory statements" by the trustee's side.

The Lehman Brothers Bill: $641.9 Million and Counting

Zach Lowe, The American Lawyer

02-23-10 -- Late Friday, the Lehman Brothers estate submitted an updated accounting of the fees it has paid to bankruptcy advisers through the end of January, and that tab now stands at $641.9 million and could well reach the $1 billion mark, according to Bloomberg and the estate's SEC filing. . . . According to our math, a smidgen less than half of that amount has gone to the various law firms working for Lehman and its creditors. A total of 15 law firms (not including the estate's fee examiner) have billed Lehman $310,791,000 since Lehman filed for bankruptcy on Sept. 15, 2008.

Judge Won't Forgive $80 Million Chrysler Debt

The Associated Press, Law.com

02-18-10 -- Former auto magnate Denny Hecker won't be getting any relief from his $80 million debt to Chrysler Financial. . . . Hecker stood up and cursed in court Wednesday after U.S. Bankruptcy Judge Robert Kressel refused to forgive the debt. It means Chrysler can claim any future earnings by Hecker. . . . Kressel says that as he reviewed incomplete evidence from Hecker, it became clear Hecker "just lied."

GENERAL

Lawyers see bankruptcy boom ahead

by Steven E.F. Brown, San Francisco Business Times

02-17-10 -- Bankruptcies, foreclosures and litigation are likely to keep providing booming business to law firms, according to a survey by Robert Half Legal. . . . When asked which area of the law would grow fastest over the next three months, the 300 lawyers in the survey put bankruptcy and foreclosure at the top of the list. Litigation and labor and employment followed.

FLORIDA

Former Rothstein Firm Partner Sued for $8 Million

John Pacenti, Daily Business Review

02-16-10 -- The bankruptcy trustee for jailed attorney Scott Rothstein's defunct law firm set his sights Thursday on equity partner Stuart Rosenfeldt, claiming $8 million in excessive compensation and linking bonuses to political contributions. . . . Rothstein has pleaded guilty to racketeering, fraud and conspiracy in a $1.2 billion Ponzi scheme based on fake structured settlements sold through the 70-lawyer Rothstein Rosenfeldt Adler. . . . Federal prosecutors accused Rothstein of funneling some of the tainted money to employees of the Fort Lauderdale, Fla.-based firm for political campaign contributions to avoid federal and state election donation caps. . . . Herbert Stettin, the firm's court-appointed trustee, is demanding the return of $7.94 million from Rosenfeldt and his wife, claiming he was entitled to a maximum $1.15 million in the past four years but received much more. Rothstein and Rosenfeldt were the firm's only equity partners.

Ruling Possible This Month in Stanford Bankruptcy

Schuyler Dixon, The Associated Press, Law.com

02-12-10 -- A federal judge said Thursday he will try to rule this month on whether to put jailed Texas financier R. Allen Stanford's businesses under bankruptcy protection. . . . Stanford's vast financial empire was placed in the hands of a court-appointed attorney last year when the Securities and Exchange Commission sued Stanford on charges that he was running a $7 billion Ponzi scheme. . . . Now some of the allegedly jilted investors are asking U.S. District Judge David Godbey to turn the case over to a bankruptcy court, arguing their rights are better served through U.S. law than the decisions of receiver Ralph Janvey. . . . Godbey said he needed time to rule.

Madoff Relatives Agree to Asset Freeze

The Associated Press, Law.com

02-08-10 -- Bernard Madoff's brother, sons and a niece, accused in a lawsuit of using the family finance business like a "piggy bank," have agreed to an asset freeze, according to a document filed in court Friday. . . . The deal with court-appointed trustee Irving Picard was described in a document filed in U.S. Bankruptcy Court in Manhattan. . . . Picard sued the family members in November seeking nearly $200 million that he said had enabled the family members to live lavishly at the expense of Madoff investors. . . . The asset freeze affects Madoff's brother, Peter; his sons, Mark and Andrew; and a niece, Shana Madoff. The consent order requires them to seek permission from Picard to spend more than $1,000 unless the expense results from a list of exemptions such as legal or medical fees. It also requires them to provide a monthly listing of all expenses.

Federal Judge Approves Settlements in Dreier Case

Noeleen G. Walder, New York Law Journal

02-08-10 -- A federal judge has approved several settlement agreements between the government, the trustees charged with liquidating the estate of disbarred attorney Marc S. Dreier and his defunct 250-attorney law firm, and various other parties affected by his massive fraud. . . . Noting that "an under-appreciated evil of substantial frauds like those of Marc Dreier is how they pit their victims against one another," Southern District Judge Jed S. Rakoff ruled Friday that a coordination agreement, which prevents the federal government from going after the proceeds of avoidance actions brought by Sheila Gowan, the trustee for Dreier LLP, was "reasonable and in the best interests of the victims collectively." . . . The coordination agreement authorizes the government to release to Gowan 97 artworks that have not been traced to Dreier's crimes.

Trustee, Madoff Investors Spar Over Payout Calculation

Noeleen G. Walder, New York Law Journal

02-03-10 -- The attorney for the bankruptcy trustee recovering the assets of Bernard L. Madoff argued before a packed courtroom Tuesday that "no one in their right mind" would use the financial statements concocted by Madoff as a basis for distributing the funds. . . . During a nearly four-hour hearing, David J. Sheehan, an attorney for trustee Irving H. Picard, urged Bankruptcy Judge Burton Lifland to accept Picard's "cash-in/ cash-out" method of compensating investors. . . . Under that approach, investors who withdrew less cash from their Madoff accounts than they deposited ("net losers") would share in whatever Picard recovers, now about $1.5 billion. . . . On the other hand, investors who withdrew funds over and above what they invested ("net winners") would get nothing.

Judge Set to Sign Off on Dreier Settlements

Noeleen G. Walder, New York Law Journal

Marc Dreier
Image: Courtesy Photo

02-02-10 -- A federal judge is set to give the green light to a number of proposed settlements involving the estates of disbarred attorney Marc S. Dreier and his defunct 250-lawyer firm. Last month, prosecutors and trustees charged with liquidating the Dreier estates asked Southern District Judge Jed S. Rakoff to approve the agreements, including one with investment manager GSO Capital Partners.

Anatomy of a Crack-Up: The Marc Dreier Case

Under the agreements, Sheila Gowan of Diamond McCarthy, the trustee for Dreier LLP, would refrain from challenging the government's attempt to collect certain forfeited funds. In turn, prosecutors would transfer certain property to Gowan, including nearly 100 artworks that have not been traced to Dreier's crimes. The government would also agree not to go after proceeds from avoidance actions brought by the Chapter 11 trustee.

SAVE THE CHILDREN

A Victims-of-Law Associate

January 2010

VIRGINIA

Former Franklin lawyer pleads guilty to lying in bankruptcy

By Tim McGlone, The Virginian-Pilot

01-26-10 -- A former Franklin lawyer pleaded guilty in federal court this morning to falsifying bankruptcy papers involving nearly $4 million he loaned to himself from an elderly client. . . . James Edward Moyler Jr., 79, who now lives in Williamsburg, is scheduled to be sentenced April 30. He faces up to five years in prison. . . . Moyler was a longtime, respected lawyer in Franklin who was forced into bankruptcy in 2008. He and his wife declared $4.2 million in debts, but he failed to disclose that he had “borrowed” just under $4 million from a client, according to court records.

Bankruptcy Judge Rules Refinancing Lender's Carelessness Won't Cost It Priority

Mary Pat Gallagher, New Jersey Law Journal

01-19-10 -- In a ruling of interest to mortgage lenders, a bankruptcy judge has ruled that even a grossly negligent lender is entitled to the benefit of equitable subrogation in determining priority. . . . The Jan. 11 decision is good news for Countrywide Homes Loans Inc., which is trying to recover on a $691,000 loan made to Richard Spair in 2004 for a refinance of his Wall Township, N.J., home. Countrywide acquired the mortgage from Quicken Loans in 2006. . . . The house was sold for $1.025 million after Spair filed for bankruptcy, and Countrywide is vying with another mortgagee for more than $900,000 in net proceeds held by the Chapter 13 trustee.

Lehman Bankruptcy Lawyers, Advisers Paid $588.4 Million So Far

By Linda Sandler, Bloomberg

01-15-10 -- Lehman Brothers Holdings Inc. has paid its lawyers and other bankruptcy advisers $588.4 million in the 15 months since it started liquidating, according to a regulatory filing. . . . The restructuring firm Alvarez & Marsal LLC, which provided Lehman with its current chief executive officer, Bryan Marsal, led the payments with $218.3 million in fees for “interim management” through December, according to the filing yesterday with the U.S. Securities and Exchange Commission. . . . Weil Gotshal & Manges LLP of New York was reported by Lehman to have collected $127.1 million through December for acting as the investment bank’s lead bankruptcy law firm, the same amount as Lehman said it had paid through November. Harvey Miller, Lehman’s lead lawyer at Weil Gotshal, didn’t immediately respond to an e-mail seeking comment yesterday.

NEW YORK

Prosecutors, Dreier Trustees Reach Liquidation Settlement

Noeleen G. Walder, New York Law Journal

01-15-10 -- After months of negotiations, prosecutors have told a federal judge they have hammered out an agreement with the trustees charged with liquidating the estates of disbarred attorney Marc S. Dreier and his defunct 250-lawyer firm. . . . Representatives of the Southern District U.S. Attorney's Office and lawyers for Sheila Gowan of Diamond McCarthy, the trustee for Dreier LLP, and Chapter 7 trustee Salvatore LaMonica of LaMonica Herbst & Maniscalco urged Southern District Judge Jed S. Rakoff on Tuesday to approve three agreements, including one with investment manager GSO Capital Partners LP.

MASSACHUSETTS

It's Judge v. Judge in Case of Bankrupt Law Grad

Posted by Robert J. Ambrogi, Law.com Legal Blog Watch

01-14-10 – In an unusual example of judicial defiance, an on-his-way-out bankruptcy judge is siding with an out-of-work and deep-in-debt law grad and issuing a rebuke to the federal district judge who overruled him. . . . "An irascible Massachusetts bankruptcy judge known for 'whacking lenders' has turned his acid pen upon the chief of the U.S. District Court of Massachusetts who overruled his decision to release a penniless bar-failer from her law school debts," reports Julia Reischel has the story at The Docket, the blog of Massachusetts Lawyers Weekly newspaper. . . . The case involves Denise M. Bronsdon, now 65, who graduated in 2005 in the top half of her class at the unaccredited Southern New England School of Law but then failed the Massachusetts bar exam three times. She is now unemployed and lives on Social Security in a room at her father's house.

MARYLAND

Citing Quinn Emanuel's Bills, Thornburgh Trustee
Seeks to Slow Payments

Andrew Longstreth, The American Lawyer

01-12-10 -- The law firms and financial advisers retained in the Thornburg Mortgage bankruptcy have had it pretty good for a while. Shortly after the jumbo loan issuer went belly up last May, the federal bankruptcy court in Baltimore established a compensation plan that allowed professionals to submit bills every month, rather than every 120 days as directed in the bankruptcy code. Among the top beneficiaries have been debtor's counsel Venable ($1,160,693) and Quinn Emanuel Urquhart Oliver & Hedges, which is counsel to the unsecured creditors' committee ($858,198). But the days of quick payouts may be numbered. Last week, the trustee in the case filed a motion (pdf) asking the court to terminate the monthly compensation order. . . . The trustee argued that the bills are too numerous to analyze and that their preparation is costing the estate a small fortune. Special criticism was reserved for Quinn Emanuel, which the trustee noted has billed the estate nearly $75,000 simply for the preparation of its monthly fee statements.

FLORIDA

Creditors Try to Block Last Paychecks to Employees of Former Rothstein Firm

Jordana Mishory, Daily Business Review

01-08-10 -- A creditors committee in the bankruptcy case of defunct law firm Rothstein Rosenfeldt Adler unsuccessfully tried Thursday to block salary payments to three employees in the wake of founder Scott Rothstein's alleged $1.2 billion fraud. . . . The committee's attorney opposed paying a total of $7,220 to firm CFO Irene Stay, assistant managing shareholder Grant Smith and billing agent Aimee Villegas because of their possible involvement in the alleged Ponzi scheme. . . . "I know Stay has committed fraudulent activity, likely one far in excess" of the $2,000 she is owed, creditor attorney Eyal Berger, an associate at Akerman Senterfitt in Fort Lauderdale, Fla., told U.S. Bankruptcy Judge Raymond Ray.

Help Support Victims-of-Law on the web by
purchasing from its Advertisers

December 2009

Bankruptcy pays off for specialists

Chapter 11 results in huge payouts for SemGroup case players.

By Rod Walton Tulsa World Staff Writer

12-30-09 -- A bankruptcy filing may usher in a blue morning for financially troubled companies, but it's a red-letter day for the attorneys, consultants and other professionals who make a living guiding firms through reorganization or liquidation. . . . Tulsa's most recent example — the rise, fall and ultimate re-emergence of midstream oil giant SemGroup — illustrates how dozens of companies, employing hundreds of people, make millions in fees throughout a Chapter 11 case, records show. . . . Now called SemGroup Corp., the company emerged Dec. 1 after 16 months in bankruptcy. . . . SemGroup so far has paid out $137.52 million to 41 firms doing a variety of Chapter 11 work. The payout doesn't end there, as the company's last monthly operating report only details fees paid through Oct. 31. . . . Future applications for fees, including those filed this week by law firm Bifferato LLC or asset evaluator Valuation Research Corp. earlier this month, likely will push that total beyond $140 million. Whether that's money well spent depends on one's view of bankruptcy consultants.

Complete coverage: Read all the stories and documents related to the SemGroup collapse.

Privilege Takes Center Stage as WaMu Bankruptcy Heats Up

Zach Lowe, The American Lawyer

12-21-09 -- Lawyers for Washington Mutual filed papers Friday in the bank's Chapter 11 case claiming Sullivan & Cromwell, on behalf of WaMu's new owners at JPMorgan Chase, has been sending out letters asking WaMu's old law firms to turn over their client files on WaMu -- files that include privileged material. . . . The letters, which WaMu's lawyers at Quinn, Emanuel, Urquhart, Oliver & Hedges have attached as exhibits, claim JPMorgan should have access to the privileged documents because JPMorgan and WaMu are essentially the same entity now. Those entities have "joint privilege," the letters claim. . . . Firms that have received the letters include Weil, Gotshal & Manges, Simpson Thacher & Bartlett, Perkins Coie and others.

Multimillion-Dollar Fee Requests Have Some Questioning Big Bankruptcy Bills

Brian Baxter and Noeleen G. Walder, ALM Media

12-18-09 -- Bankruptcy rates are a popular topic in the world we cover and always command great interest. Today's news on the subject is no different. The latest fee requests in the bankruptcies of Bernard L. Madoff Investment Securities and Nortel Networks are boosting the bottom lines of two Am Law 100 firms. It might be good news for the lawyers, but not everyone is happy about it. . . . A federal judge on Thursday awarded trustee Irving H. Picard and his team of lawyers liquidating Madoff's investment firm roughly $22 million in interim counsel fees. Southern District of New York Bankruptcy Judge Burton Lifland granted Picard and Baker & Hostetler's respective requests for approximately $836,000 and $21.3 million in fees for May 1 through Sept. 30. In August, Lifland approved about $15 million in interim fees for Picard and his attorneys.

Judge Approves General Growth Properties' Mortgage Modification Deals

Irene Plagianos, The American Lawyer

12-17-09 -- A Manhattan bankruptcy judge approved General Growth Properties Inc.'s plans to restructure more than $10 billion in mortgages Tuesday, Bloomberg reports. The restructuring will allow 103 mall properties holding those loans to exit bankruptcy by the end of the year. . . . As we previously reported, GGP, the nation's fourth-largest real estate investment trust, filed restructuring plans for the mortgages Dec. 2. The unusual deal to modify the terms of its plethora of securities has been viewed as a possible model for other investors facing foreclosure on similarly troubled real estate; it stands as the largest restructuring of commercial mortgage-backed securities debt ever.

Bankruptcy Rates Top $1,000 Mark in 2008-09

Amy Kolz, The American Lawyer

12-16-09 -- A review of bankruptcy rates in Delaware and the Southern District of New York shows that a handful of U.S.-based partners at Am Law 200 firms have inched above the $1,000 rate barrier, making bankruptcy work as lucrative as it was plentiful in 2008 and 2009. Over a 12-month period ending August 2009, there were more than 13,000 billing rate entries submitted by law firms in the nation's two busiest bankruptcy courts, according to a new database compiled by ALM Media. . . . Among U.S.-based lawyers at Am Law 200 firms, Shearman & Sterling tax partner Bernie Pistillo topped the rate chart with an hourly fee of $1,065 for his work on the bankruptcy of Stock Building Supply Holdings LLC, a building products supplier, in Delaware. (One solo practitioner in Pleasantville, N.Y., Alan Harris, surpassed Pistillo's rate, charging $1,200 an hour for his work as special real estate litigation counsel on the bankruptcy of Digital Printing Systems in the Southern District of New York.) Eleven other U.S.-based Am Law 200 partners were in the $1,000-plus club, according to the database.

Prosecution Drop May Embolden Bankruptcy Fraud as Filings Surge

By Justin Blum, Bloomberg

12-16-09 -- U.S. authorities prosecuted the fewest number of people and companies for criminal bankruptcy fraud this year since at least 1986, even as filings rose amid the worst economic crisis since the Great Depression. . . . The FBI, which is the primary agency that probes such cases, says it is putting more emphasis on other white-collar crimes, including securities and mortgage fraud. The bureau had reassigned agents handling white-collar crimes to national security after the Sept. 11 attacks. . . . Fewer prosecutions have emboldened criminals, said Juval Aviv, the president and chief executive officer of Interfor Inc., a New York-based investigation and security firm that helps find money hidden from creditors, in an interview.

Commas key in battle to control Philly newspapers?

By Maryclaire Dale, Associated Press Writer

12-15-09 -- The future of Philadelphia's two major newspapers could turn on a pair of commas in the bankruptcy code. . . . The newspapers' creditors seized on the commas to argue in a federal appeals court Tuesday for the right to use the $300 million owed them to bid for The Philadelphia Inquirer and Philadelphia Daily News. . . . The company that owns both newspapers, Philadelphia Newspapers, interprets the statute to mean it can bar such credit bids at its proposed auction. The company hopes a new group - comprised of two current and one new investor - will win with a bid of $67 million in cash and real estate.

Weil's Lehman Legal Bill Reaches $127 Million

Brian Baxter, The American Lawyer

12-15-09 -- A monthly operating report filed in Manhattan bankruptcy court on Monday shows that Weil, Gotshal & Manges has billed Lehman Brothers $127.1 million in fees and expenses for its role as lead debtors' counsel. . . . The latest fee disclosure, first reported by Bloomberg, was part of a report on Lehman's professional fees and expense disbursements through November 30. The 26-page report (pdf) filed by Weil bankruptcy partner Shai Waisman shows that Lehman has paid legal counsel and financial advisers nearly $533.5 million since entering Chapter 11 in September 2008. . . . Weil began serving as lead debtors' counsel that month as the Lehman bankruptcy became the largest Chapter 11 case in U.S. history. The firm broke the $100 million billable mark this past August.

Ernst & Young Prevails in $140 Million Case Brought by Frontier Creditors Trust

Andrew Longstreth, The American Lawyer

12-14-09 -- When the creditors of bankrupt companies draw up lists of litigation targets, auditing firms are often right there at the top. So it was for the creditors trust of the bankrupt insurer, Frontier Insurance Group. The trust, represented by John McKetta III of Graves Dougherty Hearon & Moody, alleged that Ernst & Young underestimated the reserves Frontier needed to hold, making the company look healthy when it was actually insolvent. It claimed $140 million in damages, plus interest. . . . But E&Y decided to make a stand. It refused to chip up, and instead headed for a jury trial before White Plains, N.Y., federal district court Judge Cathy Seibel. On Wednesday, after 12 days of trial, jurors needed only two hours to exonerate the auditor.

Judge Orders Lawyers to Stop Using Capitalization ‘With Abandon’

By Debra Cassens Weiss, ABA Journal

12-14-09 -- A federal bankruptcy judge is fed up with lawyers who use superfluous words and too much capitalization, and he has directed them to stop it. . . . U.S. Bankruptcy Judge Robert Kressel of Minnesota took a stand against legalese in new guidelines (PDF) for lawyers preparing proposed orders in his court, Legal Blog Watch reports, citing a story by Lawyerist.com. . . . Kressel says lawyers should eliminate superfluous words such as “hereby,” “herein” and “heretofore entered in this case.” The phrases “serve no purpose other than to make the document sound more legal, which is exactly the opposite of the goal that I am trying to accomplish,” he writes. “Compare the meaning of ‘Now, therefore, it may be and is hereby ordered that' with ‘It is ordered.’ ” . . . Kressel also observes that “lawyers love to capitalize words. Pleadings, including proposed orders, are commonly full of words that are capitalized, not quite randomly, but certainly with great abandon.

A Victims-of-Law Advertiser

Mining Giant Pays $1.79 Billion to Clean Up Sites

Jeff Jeffrey, The National Law Journal

12-11-09 -- In what the U.S. Department of Justice is touting as the largest environmental bankruptcy in U.S. history, mining giant Asarco has paid $1.79 billion to fund environmental cleanup efforts at more than 80 sites in 19 states. . . . Asarco has spent the past 110 years extracting lead, zinc and copper at sites around the country, leaving in its wake a lot of hazardous material. But with the company mired in debt during the past decade, it seemed unlikely that it would be held liable for the cost of cleaning up contaminated sites. . . . In 2002, the Justice Department accused Asarco's parent company, Grupo Mexico, of trying to strip the company of all its assets to avoid paying its bills.

Judge Kressel Puts an End to Legalese in His Court

Bruce Carton , Law.com Legal Blog Watch

12-11-09 -- Attention all lawyers who practice before United States Bankruptcy Judge Robert Kressel, D. Minn.: He has just about had it with your crappy "legalese" and he has a 19-point plan to get you writing like a real person again. . . . In this post, The Lawyerist alerts us to the new "guidelines" issued this week by Judge Kressel. As the Lawyerist observes, "it is a catalog of and prohibition against every bad legal writing practice. And it