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July 29, 2009
$197 Million Mortgage Lending Scheme
The U.S. Securities and Exchange Commission (SEC) has
sued four individuals for allegedly raising $197 million from hundreds
of investors by misrepresenting the safety and performance of
investments that were made as loans to private commercial lender
Mortgages Ltd., which ultimately filed for bankruptcy,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
The regulator claims that the four promoters and their company, Radical
Bunny LLC, violated federal securities laws by pooling investor funds to
make loans to Mortgages Ltd., according to a complaint filed yesterday
in the U.S. District Court for the District of Arizona. From at least
late 2005 through June 2008, the defendants, which include two certified
public accountants, a pharmacist and a grade school principal,
misrepresented how Mortgages Ltd. could use money loaned by Radical
Bunny by falsely telling nearly 900 investors that their funds could
only be used for commercial development when there were no restrictions,
the complaint alleges. The defendants also misrepresented to investors
that they were closely monitoring Mortgages Ltd.'s financial condition,
but they were caught completely unaware of the circumstances that
ultimately led to its bankruptcy in June 2008, according to the
SEC. Read
more. (Subscription required.)
Pressed by White House,
Mortgage Servicers Vow More Modifications
The Obama administration extracted a pledge from 25
mortgage company executives yesterday to improve their efforts to assist
borrowers in danger of foreclosure, the Associated Press reported today.
In a daylong series of meetings at the Treasury Department, government
officials reached a verbal agreement with the executives for a new goal
of about 500,000 loan modifications by Nov. 1 and stressed the
program’s urgency. The sessions came amid concerns that the Obama
administration will fall far short of its original goal of helping up to
four million troubled borrowers with modified loans. As of this week,
only about 200,000 borrowers were enrolled in three-month trial loan
modifications, out of about 370,000 who were offered modifications by
mortgage companies.
href='http://www.nytimes.com/2009/07/29/business/29mortgage.html?_r=1&ref=business&pagewanted=print'>Read
more.
WaMu Receives Approval to
Proceed with JPMorgan Probe
Bankruptcy Judge
face='Times New Roman' size='3'>Mary F. Walrath
size='3'>refused to reverse an earlier decision allowing Washington
Mutual Inc. (WaMu) to go ahead with its investigation of JPMorgan Chase
& Co. for evidence that JPMorgan sabotaged WaMu in order to acquire
it at a depressed value,
size='3'>Bankruptcy Law360 reported yesterday.
The judge ordered the parties to produce witness lists by Saturday,
according to Kevin Spittle, principal of Capital Search Group, a WaMu
investor familiar with the case. WaMu's witness list will likely include
JPMorgan CEO Jaime Dimon, he said. Judge Walrath originally signed off
on WaMu's motion to examine JPMorgan's books on June 24, and JPMorgan
filed its reconsideration motion two days later.
href='http://bankruptcy.law360.com/articles/113535'>Read
more. (Subcription required.)
Lender Pushes for Chapter 7
for Steve & Barry's
Ableco Finance LLC filed a reply Monday in the U.S.
Bankruptcy Court for the Southern District of New York, saying bankrupt
retailer Steve & Barry's has not made convincing arguments that a
chapter 7 liquidation would not be the best course of action for its
estate, Bankruptcy Law360 reported yesterday. In its July 21 objection
to Ableco's motion for conversion, the retailer argued that it had
already made significant process in the bankruptcy cases, including
negotiating an arrangement with the debtors in the bankruptcy cases of
Stone Barn Manhattan LLC, from which it purchased substantially all of
its assets in 2008, and has started reconciling administrative claims.
Ableco, which extended $60 million in debtor-in-possession financing to
the company, filed its motion for conversion on July 7.
href='http://bankruptcy.law360.com/articles/113491'>Read more.
(Subscription required.)
Senate Panel to Examine
Corporate Governance Issues
The Senate Banking Securities, Insurance, and
Investment Subcommittee will hold a hearing today at 2:30 p.m. ET titled
“Protecting Shareholders and Enhancing Public Confidence by
Improving Corporate Governance.”
href='http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=c754606c-0b95-4139-a38a-63e63b4b3fa9'>Click
here for more information.
Commentary: The Financial
Truth Commission
Congress has pledged to reform the banking system, but
too often over the past year lawmakers have chosen instead to shield the
financial industry from accountability, according to an editorial in
today’s
size='3'>New York Times. So the public has
every right to ask whether the newly formed Financial Crisis Inquiry
Commission — created by Congress to investigate the meltdown
— can be counted on to put the public interest ahead of political
loyalties, professional ties and ideological biases. The commission is
required to investigate each failure of a major financial institution
during the crisis, such as Lehman Brothers, and each major failure that
was averted by assistance from the Treasury. The 10 members — six
chosen by the Democratic leadership, four by the Republican leadership
— also have long partisan histories and at least one has strong
ties to the financial industry. It is imperative that chairman Phil
Angelides and vice chairman Bill Thomas agree on a strong investigator
— with a proven record of exposing deceptive or fraudulent
activities — to serve as the commission’s director. The
commission is allowed by law to issue subpoenas if the chairman and vice
chairman agree or if a majority of the panel agrees, as long as the
majority includes at least one Republican. Some banks may try to argue
that although they received assistance, they were never in danger of
failure, and thus are off limits to commission investigators. But all of
the major banks are implicated in the crisis, and none should be outside
the commission’s purview, according to the editorial.
href='http://www.nytimes.com/2009/07/29/opinion/29wed1.html?ref=opinion&pagewanted=print'>Read
href='http://www.nytimes.com/2009/07/29/opinion/29wed1.html?ref=opinion&pagewanted=print'>
ProtoStar Satellite Systems
Files for Bankruptcy
Satellite services operator ProtoStar Satellite
Systems Inc. filed for chapter 11 protection along with five affiliates,
Reuters reported today.ProtoStar listed assets and liabilities in the
range of $100 million to $500 million in its chapter 11 filing.It lists
Philippine Long Distance Telephone Co. as its largest unsecured
creditor, to which it owes $27.5 million. The case is
face='Times New Roman'>In re
ProtoStar Satellite Systems Inc.,U.S.
Bankruptcy Court, District of Delaware,
No.09-12658.
href='http://www.reuters.com/article/marketsNews/idUSBNG6434120090729'>Read
more.
Applied Solar Files for
Chapter 11
Solar developer Applied Solar, formerly Open Energy,
said yesterday that it has filed for chapter 11 protection, the
size='3'>San Diego Union-Tribune reported
today. The Carmel Valley, Calif.-based company said that it owes
creditors $29 million but has assets of $17.6 million. The company's
solar panels, made by another manufacturer under license, are built into
roofing tiles, rather than into modules to be installed on roofs.
Applied Solar said in a bankruptcy filing in Delaware that it is working
to sell its assets to the Newport Beach, Calif.-based Quercus Trust,
which has been lending the company money.
href='http://www3.signonsandiego.com/stories/2009/jul/29/applied-solar-files-chapter-11-bankruptcy/?business&zIndex=139987'>Read
more.
Metaldyne Wins Replacement
of Stalking-Horse Bidder
Bankruptcy Judge
face='Times New Roman' size='3'>Martin Glenn
size='3'>approved Metaldyne Corp.'s bid to substitute fellow auto parts
maker HHI Holdings Inc. as the stalking-horse bidder for its power train
assets, replacing private equity firm RHJ International
SA,
face='Times
New


Roman'
size='3'>Bankruptcy Law360 reported yesterday.
RHJI noted Tuesday that its purchase agreement with Metaldyne had been
terminated by the bankruptcy court, but said it might elect to
participate in the sale auction scheduled for Aug. 5. HHI, a portfolio
company of KPS Capital Partners LP, is a manufacturer of forged parts
and wheel bearings for the U.S. auto industry. The final auction date
for the sale of Metaldyne's power train assets is set for Aug. 5, with
any additional bids due by Aug. 3.
href='http://bankruptcy.law360.com/print_article/113568'>Read more.
(Subscription required.)
Analysis: Case Provides
Boost to Developers in Commercial Lending Battle
Hundreds of developers and builders battling banks to
keep their funding spigots open on construction projects are taking
heart from a major defeat suffered by Citigroup Inc. in its court battle
with the developer of Destiny USA, an innovative mall being built in
Syracuse, N.Y., the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. A New York state-court justice last week
ordered Citigroup to keep making payments on its $155 million
construction loan on the first phase of Destiny, which had been on track
for completion by the end of this year. Citigroup said in court filings
that the project was a 'failure' because of weak leasing and that the
bank stopped funding because developer Robert Congel failed to kick in
$15 million of additional equity as required under the loan. Supreme
Court Justice John Cherundolo ruled that Congel's side provided
'unrebuttable and undeniable' evidence that Citigroup's claim was
erroneous. He also suggested that Citigroup might have tried to get out
of its funding commitments because it needs to preserve capital. Given
Citigroup's receipt of some $44.5 billion in bailout money since the
financial crisis began, 'the defendant surely cannot be immune to
liquidity issues,' the justice wrote in his ruling. Citigroup has
appealed the decision, denying that it reneged on any commitments
because of financial problems.
href='http://online.wsj.com/article/SB124882292016488291.html#mod=article-outset-box'>Read
more. (Subscription required.)
Station Casinos Files for
Chapter 11 Protection
Station Casinos Inc. filed for chapter 11 protection
yesterday after the casino operator and its bondholders failed to reach
a full agreement during months of negotiations, the Associated Press
reported. The company, which blamed the faltering economy for a falloff
in its finances, has $5.7 billion in debt, according to Chief Accounting
Officer Tom Friel. Most of Station's assets are maintained in
casino-operating subsidies and affiliates and were not included in
yesterday’s filing. Station Casinos has struggled to pay down its
debt since becoming private in 2007 when shareholders agreed to sell the
company to the founding Fertitta family and Los Angeles financial firm
Colony Capital LLC for $90 per share. The new owners assumed $3.4
billion in debt in the buyout.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/07/28/AR2009072802295_pf.html'>Read
more.
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