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Halliburton Faces New Charges
Halliburton Co., still wrestling with mounting asbestos woes, now is
facing allegations by a key ally in its efforts to settle its asbestos
lawsuits, the Wall Street Journal reported. In February 2002,
Halliburton agreed to pay $120 million to Austrian conglomerate RHI AG
as part of a deal that put a refractories company, Harbison-Walker, into
bankruptcy-law proceedings. Harbison-Walker once was owned by
Halliburton's Dresser Industries Inc. unit and now is owned by RHI.
Terms of the 2002 agreement called for Harbison-Walker to create a
special trust that would handle many of Halliburton's growing asbestos
claims. Halliburton was to pay RHI $35 million when Harbison-Walker
filed a reorganization plan creating an asbestos trust and a final $85
million when the court approved the plan. RHI says Halliburton now is
refusing to pay the $35 million and the company is considering legal
action.
Halliburton said it has changed its mind about how it wants to settle
its 300,000 asbestos claims and the change means it doesn't owe RHI the
money anymore. 'The agreement with RHI simply doesn't apply to the
current situation,' says Halliburton spokeswoman Wendy Hall, reported
the Journal.
WORLDCOM/MCI
Onvoy Hires Second Law Firm to Defend WorldCom Fee
Allegations
Onvoy Inc., a telephone network operator that is under investigation by
the Justice Department for possibly helping WorldCom Inc. improperly
skirt network fees, said it retained a second law firm to handle the
case, Bloomberg News reported. The company has hired Paul Weiss Rifkind
Wharton & Garrison LLP of New York, Onvoy Chief Executive Officer
Janice Aune said in an interview. Onvoy last week retained Minneapolis
law firm Lindquist & Vennum PLLP to investigate claims from former
employee James Krutchen that Onvoy improperly routed U.S. calls to
Canada to avoid paying fees for using local-phone networks.
The U.S. Attorney in New York is conducting a criminal investigation
into the allegations, disclosed last month. The allegations by Krutchen
and WorldCom rivals, including AT&T Corp., could hurt Onvoy if they
cause customers to leave the closely held company. Proceeds from the
service that routes calls through Canada represent less than 1 percent
of Onvoy's sales, Aune has said. 'The cost of defending ourselves is
going to far outweigh any contribution we've gotten from this product,''
she said, reported the newswire. 'There has never been any intent on the
part of Onvoy to defraud any company.''
Worldcom's Bar From U.S. Contracts May Cut Net by $250
Million
WorldCom Inc.'s earnings may be cut by $8 million this year and a total
of $242 million in the following two years because of its exclusion from
winning U.S. government contracts, the company said in a filing with the
Securities and Exchange Commission, Bloomberg News reported. WorldCom
was suspended from competing for new federal contracts last month after
a government investigation into the company's $11 billion accounting
fraud.
U.S. Utilities Oppose Rules on Cash Pool Management
Some U.S. electric utilities have objected to new federal rules meant to
prevent them from raiding their affiliates for cash, which would require
firms to give notice if their capitalization drops below 30 percent,
Reuters reported. Reacting to abuses by Enron Corp. and other companies,
the Federal Energy Regulatory Commission (FERC) is cracking down on the
way utilities move money from parent to subsidiary units through
so-called 'cash pool' programs. The agency issued an interim rule in
June requiring utilities to document such programs. At the same time, it
issued a proposal to require utilities to give notice if their
capitalization falls below 30 percent, which it could finalize later
this year. Amid a credit crunch and downturn in power trading volumes
after Enron's collapse, FERC is trying to prevent financially weak
utilities from improperly draining cash from their subsidiaries,
reported the newswire.
FERC has withdrawn a prior proposal to require utilities to have a 30
percent capitalization to participate in cash management programs.
Utilities say the cash pools are helpful because they allow subsidiaries
to benefit from a parent firm's access to funds and avoid borrowing at
higher costs. But the agency is still seeking to require utilities to
give monthly notification if they fall below the 30 percent level.
Chicago-based Exelon Corp., one of the nation's largest utilities, told
FERC this week that the test sends improper signals to investors and
should be eliminated. The proposal 'incorrectly sends the message that a
below-30 percent capital ratio is indicative of a financially weak
company,' which is 'simply not true,' Exelon said in a FERC filing,
Reuters reported.
U-Haul Parent Amerco Sees Paying Creditors Fully
Amerco Inc., the parent of U-Haul International Inc., on Friday repeated
its intention to fully pay off its creditors, without diluting
shareholders, disputing press reports that said the company has more
debt than it previously disclosed, Reuters reported. Amerco, which
sought bankruptcy protection on June 20, said it filed on Thursday new
schedules with the U.S. Bankruptcy Court in Reno, Nev., where it is
based. It said these schedules, which reflect various creditor claims,
do not reflect stockholder equity or net worth. It said it believes the
fair value of certain underlying lease assets exceeds related contingent
lease guaranty claims. Amerco said that while it is required under
bankruptcy rules to disclose the claims, 'they do not constitute debt of
the company.' Amerco listed $1.04 billion of assets and $884 million of
debts in its chapter 11 petition, reported the newswire.
Next Generation Technology Holdings Inc. Files Voluntary Petition
for Chapter 11 Reorganization
Next Generation Technology Holdings, Inc. announced in a press release
on Friday that it has filed for chapter 11 bankruptcy protection with
the U.S. Bankruptcy Court for the Southern District of New York. The
voluntary filing will allow the company to continue operating in the
ordinary course of business, while it develops a reorganization plan to
maximize recovery for the company's stakeholders.
Creditors Challenge Madster File-sharing Service's Bankruptcy
Petition
Creditors from the recording and motion picture industries are asking a
U.S. bankruptcy court judge to throw out Madster creator John Deep's
latest chapter 13 petition, the group announced in a press release
distributed by Business Wire. The creditors, who control copyrights on
music and movies once freely exchanged on Deep's defunct Madster
computer file-sharing service, filed papers on Tuesday seeking to have
the chapter 13 case dismissed or converted to a chapter 7
liquidation.
Deep filed a chapter 13 petition after a U.S. district court judge ruled
that recording industry creditors could pursue the collection of a
judgment against him in excess of $100,000. Deep had argued that the
judgment, obtained in an Illinois federal court, violated bankruptcy law
protection he had from a previously filed case. Deep also filed a
chapter 13 petition in March 2002, but he withdrew that case in
February, days before a hearing to consider converting it to a chapter 7
case. In their papers filed this week, the creditors argue Deep is
abusing the judicial system by filing cases and motions simply to delay
the legal consequences of his actions. 'Deep has no ability or intent to
propose and effectuate a chapter 13 plan, and he intends nothing more
than to use the bankruptcy process to evade his creditors,' they wrote
in their motion, according to the press release.
FLEMING
Fleming Companies Inc. D.I.P. Selling 61 Locations
Fleming Companies Inc. announced in a press release on Friday that its
real estate consultant, Keen Realty, LLC, is marketing 62 locations.
Available to users and investors are 14 fee-owned locations consisting
of warehouse, retail and vacant land, and 13 leaseholds consisting of
retail and warehouse that will be auctioned on October 14, 2003 with
bids due by October 9, 2003. In addition, 34 leaseholds consisting of
retail and warehouse are also available, but not part of the auction.
Offers on these leaseholds are being considered now.
Supervalu to Buy Some Fleming Assets
Food distributor and retailer Supervalu Inc. said on Sunday it agreed to
buy certain assets of bankrupt Fleming Cos. Inc. from privately owned
C&S Wholesale Grocers Inc., Reuters reported. C&S is expected to
win approval from the bankruptcy court over the next few weeks to buy
Fleming's wholesale grocery business, after which Supervalu said it
would execute a deal with C&S. Supervalu said it signed a letter of
intent to acquire from C&S Fleming's operations in La Crosse and
Milwaukee, Wis., and Massillon, Ohio. The company added that it would
assume ownership of trade names Festival Foods and Sentry Foods, as well
as licensing rights to Jubilee Foods in some markets. 'We look forward
to completing this unique opportunity to leverage our distribution
network in the Midwest,' said Supervalu Chairman and Chief Executive
Jeff Noddle, reported the newswire.
Air Canada Hopes to Emerge from Bankruptcy by Year End
Air Canada is reportedly hoping to emerge from bankruptcy protection at
the end of the year, M2 Communications reported. The airline has
greatly reduced its daily operating losses following deep cuts and an
increase in passengers in the peak summer travel season. The airline
recorded an average daily loss of CAD400,000 in June, compared with a
CAD5m daily loss two months earlier. Air Canada filed for bankruptcy
protection on April 1, 2003.
Lawyers Pressed to Give Up Ground on Client Secrets
Impelled by a wave of corporate scandals, tax evasion and concerns over
terrorism, government regulators and prosecutors have taken a variety of
steps that seek to limit what some lawyers say is a core principle of
their profession: the ability to protect their clients' confidences, the
New York Times reported. Many lawyers have reacted to the new
restrictions by arguing that the lawyer-client privilege is not only a
traditional tool in their arsenal but a critical one in the proper
functioning of the legal system.
The American Bar Association will consider changes to its model code of
conduct, which state judiciaries draw on in defining lawyers'
responsibilities. The changes would recommend permitting lawyers greater
discretion to disclose client confidences, although lawyers would not be
required to do so, as the regulators are insisting. Still, many lawyers
said they could not remember such a broad encroachment by the federal
government on how they practice. 'In my experience, since the early 60s,
there's been nothing like this,' said Stefan F. Tucker, a tax lawyer in
the Washington office of Venable, who said that he was worried about the
impact of new rules from both the Justice Department and the Securities
and Exchange Commission. 'You can do something that is perfectly kosher,
it's perfectly above board, and someone can come in after the fact and
say it wasn't proper,' he said, reported the Times.
Law Firm Sanctioned Over Conflict in Jore Case
The Seattle law firm that represented former Jore Corp. during the Ronan
company's bankruptcy in 2001 and 2002 recently was sanctioned by U.S.
Bankruptcy Court Judge Ralph Kirscher for not disclosing it had a
conflict of interest in the case, the Missoulian reported.
Kirscher ordered the firm, Perkins Coie LLP, to pay back to the
bankruptcy court $624,000 in fees and an undetermined amount of costs
the firm received from the bankrupt estate. It also will not be eligible
to collect other compensation it billed Jore.
Perkins Coie billed the bankrupt Jore Corp. $1.6 million in fees for
7,161 hours of legal work and $215,765 in expenses, court records state.
Some of the expenses, but none of the fees, may be reimbursed to the law
firm if Perkins Coie can show it paid for work the bankruptcy court
otherwise would have performed. Even before Kirscher's order, Perkins
Coie acknowledged it would probably never be able to collect any of the
money owed it after the bankruptcy sale because old Jore had no tangible
assets remaining. Perkins Coie has denied wrongdoing. ''We do feel we
made the proper disclosures. We believe the judge is wrong and we will
appeal,'' Perkins Coie managing partner Robert Giles of Seattle said
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Kmart Quarterly Loss Narrows
Kmart Holding Corp. on Friday posted audited first-quarter results that
reflect the impact of 'fresh start' accounting after the retailer
emerged from bankruptcy protection, Reuters reported. The company also
said sales of its Martha Stewart products have not suffered badly. Kmart
said the audited results are in line with what it had originally
reported in June, but it reclassified certain items from the year-ago
quarter. The audited results do not have any material impact on its
results, Kmart said. The company reported a net loss of $862 million, or
$1.65 per share, for the first quarter ended April 30, reported the
newswire.
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