March 23, 2000
Senate Leaders Fail to Reach Agreement on Splitting Minimum
Wage/Tax and Bankruptcy Bill
Yesterday Senate Republicans and Democrats failed to reach an
agreement over how to separate the minimum wage/small business tax
package from the bankruptcy bill, according to CQ Daily
Monitor. House Majority Leader Trent Lott (R-Miss.) had proposed to
remove the wage and tax provisions from the bankruptcy bill passed by
the Senate. Under his plan, the wage increase of $1 per hour would be
spread over a three-year period and added to a House-passed tax bill
(H.R. 3081), which is designed to increase the wage over two years and
provide a set of $112.7 billion tax breaks. John Czwartacki, a spokesman
for Lott, said yesterday that 'All options are being mulled about and
all options are being considered.' Sen. Charles E. Grassley (R-Iowa)
said, 'Senate negotiators have already coalesced on a unified bipartisan
position for the Senate to take in conference on much-needed bankruptcy
reform.' In order to send the bill to conference, the tax provision must
be removed because the Constitution requires that all tax legislation
originate in the House. Lott has said that if the bankruptcy bill is not
split off from the other issues, it will die or would have to be
reintroduced.
Senate Minority Leader Tom Daschle (D-S.D.), who has been negotiating
with Lott on how to get to conference on the bills, offered support only
if he was able to get a Senate vote on minimum wage provisions through a
motion to instruct conferees to support the two-year increase, backed by
Democrats. But Sens. Russell Feingold (D-Wis.) and Paul Wellstone
(D-Minn.), who oppose the bankruptcy bill, objected. Feingold called the
bill 'too unbalanced' because the tax breaks are too large and the wage
increase spread out over three years.
Lott has been resistant to a separate vote on the minimum wage issue,
arguing that it's not necessary because in November Republicans defeated
by 50-48 the Democratic proposal to increase the wage over two years and
provide $30 billion in tax breaks. Sen. Edward M. Kennedy (D-Mass.)
angrily vowed to repeatedly bring up the minimum wage measure for votes
in the Senate and said, 'We're going to be voting on a two-year increase
in the minimum wage, and we're going to do it again, and again and
again. So get used to it. '
Consumers Increasingly Shun Credit Card Offers
According to market research firm BAI Global Inc., consumers
responded to only 1 percent of 2.87 billion credit card solicitations
mailed to them during 1999--an all-time low response rate in the
survey's 10-year history, The Wall Street Journal reported.
According to the Tarrytown, N.Y., firm, five percent of the 10,000
households surveyed by the firm during the fourth quarter of 1999 said
they had recently applied for a credit card, down from 7 percent for the
same period a year earlier. Most consumers do not want more credit
cards. Robert Hammer, chairman of R.K. Hammer Investment Bankers,
Thousand Oaks, Calif., said, 'Many consumers already have five cards. A
mature industry has hit its saturation point.' The solicitations have
been so ineffective that many issuers are cutting back on their
mailings. Direct mail volume dropped 17 percent from a record 3.45
billion pieces sent during 1998. In part, the mailings dropped because
an industry shakeout cut the number of credit card issuers last year,
but the glut in the market is also forcing credit card issuers to find
new ways to find customers.
Regulators Crackdown on Abusive Lending to Low-income
Borrowers
Federal Reserve Chairman Alan Greenspan said yesterday that
officials are increasingly concerned about 'abusive lending practices
that target specific neighborhoods or vulnerable segments of the
population and can result in unaffordable payments...and foreclosure,'
The Wall Street Journal reported. The Fed is 'working on
several fronts to address these issues and recently convened an
interagency group to identify aberrant behaviors and develop methods to
address them,' Greenspan told the National Community Reinvestment
Coalition yesterday, which promotes bank lending to distressed
communities. The multi-agency task force, which has met three times,
still has a loose agenda, but steps under consideration include tougher
enforcement of fair lending laws, new regulation or legislation and a
coordinated policy statement defining the problem. Congress is also
examining new limits on subprime lending, which carries a higher
interest rates and generally involves people with credit problems who
have been shunned by traditional lenders. The subprime lending market
defended itself, with the National Home Equity Mortgage Association
saying that critics 'are exaggerating the extent of the problem.'
Claridge Files Amendment to Joint Plan
The Claridge Hotel & Casino Corp., Atlantic City, N.J., and
its wholly-owned subsidiary, The Claridge at Park Place Inc., and
Atlantic City Boardwalk Associates L.P. filed its first amended joint
plan of reorganization and disclosure statement in Camden, N.J.,
according to a newswire report. Consistent with the plan initially filed
in late January, the plan proposed that Atlantic City Boardwalk will
transfer its assets, which include principally the land, building and
furnishings of the Claridge Casino Hotel, to the reorganized Claridge.
The plan providers for the holders of the company's $85 million first
mortgage notes to receive on a pro rata basis 100 percent of the equity
of the reorganized Claridge, outstanding on the effective debt of the
plan, and debt not to exceed $15 million in the form of a new 10-year
secured note carrying an 8 percent coupon rate. The plan provides for
unsecured creditors to be paid in six equal installments over a
five-year period beginning on the effective date of the plan. Total
payments to unsecured creditors are not to exceed $5.5 million. The
court plans to issue its opinion on the amended disclosure statement by
mid-April. Last August the company and the subsidiary filed chapter 11.
In October, Atlantic City Boardwalk also filed chapter 11.
Crown Vantage Closes on First Installment of DIP
Financing
Crown Vantage, Cincinnati, announced yesterday that it closed
on the first installment of its debtor-in-possession (DIP) financing in
the amount of $50 million, according to a newswire report. On March 16,
the Bankruptcy Court for the Northern District of California approved
the company's access to the first installment of the funding under its
previously announced $100 million DIP financing arranged with Morgan
Guaranty Trust Co. of New York as administrative agent. Crown Vantage is
one of the world's leading manufacturers of value-added papers for
printing, publishing and specialty packaging.
National Tobacco Council Urges Reasonable Appeal Bonds
Requirements
The National Tobacco Council Inc. is urging N.C. Governor Hunt
to call a special session of the General Assembly to immediately enact
legislation to cap the amount of punitive damage appeals bonds,
according to a newswire report. The organization issued a press release
stating that North Carolina businesses involved in lawsuits with
judgments in the millions and billions of dollars could face bankruptcy
before they have even been able to have their appeals heard unless the
law is changed. The Council said its proposal to Hunt would in no way
limit the amount of damages that a plaintiff could receive, but would
simply allow the companies to continue providing economic benefits to
N.C. residents through jobs and taxes until all matters pertaining to
the judgment can be resolved. Council President Lisa J. Eddington said,
'Defendants facing enormous punitive damages judgments are required to
post a bond for at least the same amount as the judgment in order to be
able to appeal the judgment. For companies facing the colossal monetary
judgments that are common these days, this means they could be forced to
file for bankruptcy before they can appeal their case. Under current
North Carolina law, multi-billion dollar judgments from other states
against the tobacco industry could swiftly bankrupt the tobacco
companies...' She also said that in 1997, the tobacco industry in North
Carolina provided 242,361 jobs and that North Carolinians were able to
earn more than $6.9 billion in wages as a result.
Class Action Suit Filed Against Fruit of the Loom Top
Officers
Milberg Weiss announced yesterday that a class action suit has
been filed in the U.S. District Court for the Western District of
Kentucky on behalf of purchasers of Fruit of the Loom Inc. Class A
common stock during the period between Sept. 28, 1998 and Nov. 4, 1999,
the class period. The complaint charges the company's two top officers
with violations of the Securities Exchange Act of 1934 and that during
the third and fourth quarter of 1998, the company told investors that it
was materially reducing levels of finished goods and raw materials
inventory by curtailing production for several days in each of those
quarters, and that the company expected strong sales growth in
1999-2000. On April 21, 1999, Fruit of the Loom reported its first
quarter 1999 results, including a loss of $.13 per share. The company
then re-forecast 1999 sales, projecting better results in the second
half of the year. In November, the company revealed a loss of $166.4
million, or $2.49 per share, for the third quarter of 1999. The firm
filing the suit said the loss was not only due to the company's poor and
out-of-control operations, but also a massive $60 million write-off of
over-valued and non-existent inventory, a $20 million loss on cotton
futures contracts and a $10 million charge for a loss on a supply
contract from a previously sold facility. In December, Fruit of the Loom
ran out of money and filed chapter 11.
Former Attorney Pleads Guilty to Mail Fraud
U.S. Attorney Donald K. Stern announced yesterday that Kirk
Whitaker Jones, formerly of Great Barrington, Mass., pled guilty to two
counts of mail fraud in a scheme to defraud the U.S. Bankruptcy Court
and a bankruptcy debtor by filing false and fraudulent affidavits,
according to a newswire report. At a hearing yesterday, a prosecutor
told the judge that Jones had formerly represented Arthur Hecht, a
client in a civil case seeking money damages against Robert Hatch. Hatch
filed bankruptcy, and Jones missed an important filing deadline in the
bankruptcy case that would have resulted in his client not being able to
further pursue his claim against Hatch. According to the prosecutor,
Jones, to remedy his mistake, help his client reinstate his claim and
avoid a malpractice suit, filed affidavits making false and fraudulent
assertions about a conversation with his client that never occurred. The
prosecutor also said that Jones forged his client's signature to an
affidavit after his client had already died. Jones faces a maximum of
five years in prison, a $250,000 fine, restitution and three years of
supervised release on each of the two accounts; his sentencing is
scheduled for June. The case was referred by the U.S. Trustee's Office
in Worcester, Mass., and Boston.
Trustee Appointed to Investigate California Firm
Bankruptcy Judge Rohn E. Ryan (C.D. Calif.) has approved
creditors' request to appoint a trustee to take control of DFJ Italia, a
defunct Orange County, Calif., investment firm managed by two
ex-convicts who allegedly lured clients with promises of big returns,
the Associated Press reported. Documents filed in bankruptcy court
allege that DFJ lured investors, including L.A. Rams stars and Hollywood
stars, by boasting that the firm had ties to Italian royalty and
connections to the European economic community. A group of five
investors filed claims Monday to force the company into chapter 7, and
Judge Ryan appointed Thomas H. Casey as trustee to investigate. An
attorney for the investors said that there is not any evidence that the
money was ever placed in suitable or appropriate investments. Federal
investigators have been looking into DFJ for months amid charges that
the firm ran a pyramid scheme that paid off old investors with money
from new investors.
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