April 252007

 

GAO
Study Questions Value of Credit Counseling Requirement under
BAPCPA

The Government Accountability
Office (GAO) released a report yesterday that said that the value of
the pre-filing credit counseling requirement under BAPCPA is
not clear. To address concerns raised about potential abusive practices
by credit counseling agencies or that the new credit counseling
requirement becomes a barrier to filing for bankruptcy, the GAO
undertook the study to examine (1) the process of approving counseling
and education providers, (2) the content and results of the counseling
and education sessions, (3) the fees charged and (4) the availability of

and challenges to accessing services. To address these issues, the GAO
reviewed U.S. Trustee Program data and application case files, and
interviewed a wide range of individuals and groups involved in the
bankruptcy process. The GAO study recommended that the Department of
Justice’s U.S. Trustee Program should (1) develop the capability
to track and analyze the outcomes of prefiling credit counseling, and
(2) issue formal guidance on what constitutes a client’s
“ability to pay.” The U.S. Trustee Program agreed with the
GAO’s recommendations. 
href='http://www.gao.gov/new.items/d07203.pdf'>Click here to
read the GAO’s report titled “Bankruptcy Reform: Value of
Credit Counseling Requirement Is Not Clear.”

w:st='on'>
size='3'>
name='2'>Spokane
face='Times





New



Roman' size='3'> Diocese's Bankruptcy
Plan Approved

Bankruptcy Judge
Patricia Williams
on Tuesday confirmed a plan to allow the Catholic Diocese

of Spokane to emerge from bankruptcy and pay victims of sex abuse $48
million, the Associated Press reported today. The settlement requires
Spokane Bishop William Skylstad, president of the U.S. Conference of
Catholic Bishops, to support an end to statutes of limitations for
sex-abuse crimes and write letters of apology to victims and their
families. About 150 people qualify for payments. Each will receive
between $15,000 to $1.5 million, depending on the extent of abuse.
Nearly $20 million will come from insurance settlements, and the 82
parishes in the diocese will contribute a total of $10 million, while
the remainder will come from the sale of church property. The plan also
sets aside $1 million for future claims. 

href='http://www.nytimes.com/aponline/us/AP-Church-Abuse-Spokane.html?pagewanted=print'>Read

more.

name='3'>Senate Turns Back Attempt to Loosen Sarbanes-Oxley
Act

The Senate on Tuesday
turned back an attempt to weaken the 2002 Sarbanes-Oxley corporate
governance law, signaling that congressional support is still strong for

the landmark measure despite criticism from some in the business
community, CongressDaily reported today. The Senate voted 62-35

to table an amendment by Sen. Jim DeMint (R-S.C.) that would have
exempted companies with market capitalization of less than $700 million,

revenue of less than $125 million or with fewer than 1,500 shareholders
from a key provision of the law that was passed in the aftermath of the
Enron Corp. and WorldCom Inc. scandals.  The
DeMint measure would have exempted those firms from §404 of the
law, which requires public companies to establish and maintain internal
controls and financial reporting procedures, which also must be
certified by an outside accounting firm. Business lobbyists have
complained that §404 is too burdensome for smaller companies to
comply with and contains language too vague for the SEC to
implement.

Subprime
Mortgages

name='4'>OCC Official Expresses Concern over Subprime Mortgage
Foreclosures

Comptroller of the
Currency John C. Dugan expressed concern about the risk of widespread
foreclosures among subprime borrowers and the resulting costs for
homeowners, communities and financial institutions, according to an
Office of the Comptroller of Currency press release yesterday.
“The loss to lenders has been pegged at between $40,000 and
$50,000 per foreclosed home, and some lenders report losing 50 cents on
the dollar,” Dugan said. he noted that the cost to other
stakeholders, including local communities, is equally significant and
may have longer lasting consequences. 
size='3'>“Foreclosures drag down neighborhood property values and
make it harder to refinance or obtain new financing,' he said.
Leaving a property vacant while in foreclosure often
creates a negative cycle of disinvestment and decline for entire
communities.” Dugan said that federal banking agencies are taking
steps to deal with the prospect of increased foreclosures. He also said
that delinquent borrowers would benefit from credit counseling, but many

are unaware of their options because they avoid mailings and phone calls

from their lender. 
href='http://www.occ.gov/ftp/release/2007-44a.pdf'>Click here to
read the OCC press release.

name='5'>New Century Gets Court Approval to Sell Core Loan
Unit

New Century Financial
Corp. received bankruptcy court approval on Tuesday to proceed with the
sale of its key loan origination unit in a swift auction that will end
next week, Reuters reported yesterday. Bankruptcy Judge
face='Times New Roman' size='3'>Kevin Carey
size='3'>said that he will sign an order approving the auction, at which

the company will seek offers of at least $1 million. The auction will
end on May 2. Judge Carey also said he will sign an order allowing New
Century to sell its Access Lending Corp. subsidiary, which it acquired
last year. New Century has court approval to sell its loan servicing
unit and more than 2,000 loans. 

href='http://www.nytimes.com/reuters/business/business-usa-subprime-newcentury.html?pagewanted=print'>Read

more.

name='6'>Mesaba Emerges from Chapter 11 with New
Owner

After spending more than
a year and half in bankruptcy protection, the emergence of Mesaba
Airlines from chapter 11 Tuesday was announced by its new owner,
Northwest Airlines,
size='3'>Bankruptcy Law360 reported yesterday.

Under the all-stock sale, Mesaba creditors will be granted a $145
million unsecured claim in Northwest's ongoing bankruptcy proceeding in
exchange for Northwest receiving 100 percent of Mesaba's new common
stock. Read more. Mesaba, previously a regional carrier for Northwest,
is now a wholly owned subsidiary operating a fleet of 50 planes as
a
size='3'>Northwest Airlink partner.
Mesaba, a feeder carrier for Northwest that provides regional service to

smaller airports, entered bankruptcy about a month after Northwest filed

for chapter 11 in September 2005. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=23382'>Read

more. (Registration required.)

Judge

Extends LID’s Use of Cash Collateral

Bankruptcy Judge
James Peck
size='3'>has given w:st='on'>New
York diamond seller LID
Ltd. approval to use part of its cash collateral to keep operations
afloat while it tries to reorganize under chapter 11 protection,
Bankruptcy Law360
reported yesterday. The judge chose to extend the motion,

which was first granted shortly after the company entered chapter 11 in
mid-March until May 2, at which time another hearing will be held. The
lenders objected to the move but agreed to the extension, though they
did not withdraw their stated protests to LID’s use of the cash
collateral, according to court documents. The money will be used to
finance the company’s operating expenses, which last month totaled

about $658,208 on monthly income of $1.25 million, court papers
reveal. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=23383'>Read

more. (Registration required.)

name='8'>Calpine Moves Lawsuit over KERP Agreement to Federal
Court

Bankrupt Calpine Corp.
has removed a breach of contract lawsuit filed by a former employee from

state court to federal court, saying the claims will affect the assets
available to creditors,
size='3'>Bankruptcy Law360 reported yesterday.

Joseph Hayden filed his suit against Calpine Corp. and Calpine Merchant
Services Co. Inc. last month in w:st='on'>
size='3'>Texas. His suit
alleges breach of contract and promissory estoppel, and seeks damages
and attorneys’ fees. Calpine pushed for employee incentive plans
and severance plans to entice key employees, including Hayden, to stay
with the company after it filed for bankruptcy protection in the U.S.
Bankruptcy Court for the Southern District of New York in December 2005.

Hayden says that he was promised a supplemental bonus of $125,000 to be
paid in two transactions, but he maintains that he was terminated
without cause in May 2006 and was denied benefits under the employee
incentive plan, including but not limited to the cash bonus, severance
benefits and performance bonuses. Calpine said in its notice of removal
that it hasn’t been served in the suit, despite Hayden’s
attorneys filing in Harris County, Texas, about a month ago. It also
maintains that the suit should be dealt with in bankruptcy
court. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=23303'>Read

more. (Registration required.)

name='9'>Appellate Court Declines to Rehear Trade Secrets Case
against Lionel

The U.S. Court of Appeals

for the Sixth Circuit has declined to rehear the Lionel trade secrets
case, handing the bankrupt model-train maker a temporary victory in its
ongoing intellectual property battle with rival Mike’s Train
House, Bankruptcy
Law360 reported yesterday. The Sixth Circuit
on Friday rejected Mike’s Train House's request for the full court

to reconsider its case, a move sought in the wake of an appellate panel
overturning the $38.6 million trade secrets misappropriation ruling that

sent Lionel into bankruptcy.
size='3'>The central dispute dates back to 2000, when rival toy train
manufacturer Mike’s Train House alleged that Lionel’s Korean

supplier—Korea Brass—stole design drawings and other
confidential information from Samhongsa, its Korean supplier. The suit
maintained that Lionel knew or should have known that those trade
secrets were being used in its products. In December, a panel of the
U.S. Court of Appeals for the Sixth Circuit reversed a district court
ruling that ordered Lionel to pay the hefty sum and enjoined Lionel

from using the infringing designs. The appeals court ruled that Lionel
was unjustly charged double damages in the case, overturning the
jury’s damages award. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=23286'>Read

more. (Registration required.)

name='10'>Vonage Can Sign Up Users During Appeal

Vonage Holdings Corp. won

a court ruling allowing it to continue to sign up new customers while it

appeals a previous court decision that it violated patents held by
Verizon Communications Inc., the
size='3'>Wall Street Journal reported today.
The U.S. Court of Appeals for the Federal Circuit issued Vonage a stay
of the previous court's injunction that would have barred it from
signing up new customers throughout its appeal. In spite of the ruling,
the Internet-calling start-up still faces plenty of trouble, including
more legal battles and growing competition from cable companies that are

offering their own digital-phone services. It will also have to convince

its existing 2.4 million subscribers not to defect amid recent turmoil.
Vonage's chief executive stepped down during the legal battle with
Verizon and following disappointing financial results. 

href='http://online.wsj.com/article/SB117744032353980809.html?mod=home_whats_news_us'>Read

more. (Registration required.)

International

name='11'>Rival Bid for ABN Amro Is $98.5 Billion

Royal Bank of

size='3'>Scotland
size='3'>, the British bank, and two other European lenders today
offered 72.2 billion euros, or $98.5 billion, for ABN Amro, the largest
Dutch bank, triggering one of the biggest takeover battles in the
banking industry, the
size='3'>New York Times reported today. Royal
Bank of

size='3'>Scotland, together
with Banco Santander Central Hispano,
w:st='on'>
size='3'>Spain’s
largest bank, and Fortis, a w:st='on'>

size='3'>Belgium
size='3'>banking group, offered 39 euros a share in stock and cash for
ABN Amro. Their offer, 70 percent in cash and the rest in stock, trumps
a 36.25 euros all-share recommended offer made by Barclays, another
British bank, on Monday.

size='3'>The bid by the Royal Bank of
w:st='on'>

size='3'>Scotland
size='3'>group depends on ABN Amro keeping LaSalle Bank, its American
operation, which is considered one of its most attractive assets. On
Monday, ABN Amro announced that it had agreed to sell LaSalle to Bank of

America in what was widely seen as an attempt to discourage an approach
by the Royal Bank of
w:st='on'>
size='3'>Scotland
size='3'>consortium. 

href='http://www.nytimes.com/2007/04/25/business/worldbusiness/25cnd-bank.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read

more.

href='http://www.nytimes.com/2007/04/25/business/worldbusiness/25cnd-bank.html?_r=1&oref=slogin&ref=business&pagewanted=print'>