Wells Fargo Bank Reaches Settlement with USTP over Homeowners in Chapter 13



The U.S. Trustee Program (USTP) announced in a press release today that it has reached an agreement with Wells Fargo Bank, N.A. (Wells Fargo) requiring the bank to pay close to $3.5 million in remediation on account of 8,000 homeowners in chapter 13 bankruptcy. The proposed resolution supplements a November 2015 settlement in which Wells Fargo agreed to pay $81.6 million in remediation for its repeated failure to provide homeowners with payment change notices (PCNs) as required under federal bankruptcy law. Under that settlement, Wells Fargo also agreed to change its internal operations and submit to compliance monitoring by an independent reviewer. That compliance monitoring led to the discovery of a deficiency in Wells Fargo’s processes and procedures relating to the certificates of service filed with the PCNs between December 2011 and May 2016. PCNs that were served on borrowers by
mail were not mailed on the same day they were filed with the bankruptcy court. As a result of this delay in mailing, thousands of homeowners received their notices less than 21 days before mortgage payment changes took effect, in violation of federal bankruptcy rules, and the certificates of service filed with the PCNs did not accurately reflect the dates on which the PCNs were served by mail.

Commentary: Trying to Turn Back the Clock on Deals Gone Sour



Lyondell Chemical and Basell AF completed their merger nearly nine years ago, but former shareholders of Lyondell now face the possibility that a new court ruling could force them to pay back the buyout money — all $12.5 billion of it, according to a commentary in Tuesday's New York Times DealBook blog. Several such clawback cases over leveraged buyouts (LBO) in the years before the financial crisis but later failed have resulted in thousands of shareholders now fighting to keep the money that was paid out to them. In July 2007, with the merger market still a bit bubbly, Lyondell was the target of a $20 billion LBO. Basell borrowed the entire purchase price to create the third-largest chemical company in the world, paying $12.5 billion to shareholders and the rest in fees and debt refinancing. But the chemical industry soon spun into a decline, and in the financial crisis the
combined company could not shoulder its debt. LyondellBasell entered bankruptcy in January 2009, only 13 months after the purchase was completed. The big banks — Citigroup, Goldman Sachs and Merrill Lynch — were sued, accused of mistreating junior creditors. They settled for $450 million in cash and notes. Len Blavatnik, the Russian-born founder of Basell’s owner who orchestrated the deal, was also sued. The bankruptcy trustee turned on Lyondell’s old shareholders, according to the commentary. In three lawsuits, the trustee argued that the sale of Lyondell was a fraudulent transfer.





Get the insight you need on advanced fraudulent transfers with ABI's Advanced Fraudulent Transfers: A Litigation Guide.

Study: Who Pays for Police Misconduct in Bankrupt Cities?



As there is such a wide range of creditors swept into the chapter 9 municipal bankruptcy process, these cases now have classes of general unsecured creditors that include plaintiffs in civil rights lawsuits alleging unconstitutional police conduct, according to a preliminary research paper by former ABI Resident Scholar Melissa Jacoby. San Bernardino's bankruptcy plan, which seeks to release the liability of nondebtor officers as well as the debtor, has proposed a 1 percent payout. The confirmation hearing is currently set for October 2016. Jacoby's research examines the Detroit, Vallejo and San Bernardino cases to see how a bankruptcy filing affects civil rights plaintiffs, starting with the immediate injunction against litigation and debt-collection activity, and ending with the legal release of debt and a restructuring plan. To download a copy of the study, please
href="http://connect.abi.org/e/107412/papers-cfm-abstract-id-2796582/zgphf/93…">click here.

Commentary: Are We on the Brink of a "Restaurant Recession?"



Talk of a "restaurant recession" has been percolating after an investment bank analyst used the phrase in a recent research note to describe where the dining industry might be headed, according to a Chicago Tribune commentary on Tuesday. Dunkin' Donuts saw traffic slip at its U.S. locations in the latest quarter. Potbelly Sandwich Works said it expects to be challenged by a "more cautious consumer" in the near future. And McDonald's said its sales were hampered by a broad-based retreat from dining out. Of the 25 largest restaurant brands in the United States this quarter, only one likely posted an increase of 5 percent or better in sales, according to Mark Kalinowski, a restaurant industry analyst for Nomura. That would be the lowest number of restaurants hitting that threshold in any quarter so far this decade, Kalinowski said. Business is tough for mega-brands, but it doesn't
tell us much about how regional players or independent outposts are faring. "Ultimately, consumers are spreading their purchasing across a broader range of brands," said Darren Tristano, president of restaurant research firm Technomic.

Fed Officials Brace for (Familiar) New Normal



For much of the post-financial-crisis era, U.S. Federal Reserve officials have held to a belief that they could get back to their old way of doing things, the Wall Street Journal reported on Monday. Growth would resume at a modest pace, annual inflation would climb to 2 percent and interest rates would gradually rise from near zero to a normal level near 4 percent or higher. However, growth in economic output appears stuck at a slow pace, with inflation vulnerable to undershooting the central bank’s target. “New realities pose significant challenges for the conduct of monetary policy,” San Francisco Fed President John Williams said last week. Unconventional tools used after the financial crisis — including purchases of long-term Treasurys to push down long-term interest rates and assurances of low short-term rates into the future — could be rolled out when another
downturn hits. A portfolio of securities, now $4.2 trillion, could grow. Unpopular interest payments to banks for their deposits at the central bank could persist.

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