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March 27, 2008
name='1'>Inquiry Assails Accounting Firm in Mortgage Lender’s
Collapse
An independent report
commissioned by the Justice Department showed that subprime mortgage
lender New Century Financial engaged in “significant improper and
imprudent practices” that were condoned and enabled by auditors at
the accounting firm KPMG, the
size='3'>New York Times reported today. E-mail
messages uncovered in the investigation showed that some KPMG auditors
raised red flags about the accounting practices at New Century, but that
the KPMG partners overseeing the audits rejected those concerns because
they feared losing a client. The report focuses on how New Century
accounted for losses on troubled loans that it was forced to buy back
from investors like Wall Street banks and hedge funds. The report said
that investigators “did not find sufficient evidence to conclude
that New Century engaged in earnings management or manipulation,
although its accounting irregularities almost always resulted in
increased earnings.”
href='http://www.nytimes.com/2008/03/27/business/27account.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='2'>Treasury Secretary Calls for Stronger
Regulation of Investment Banks
Treasury Secretary Henry
M. Paulson Jr. yesterday called for strengthened federal oversight of
investment banks in the wake of the collapse this month of Wall Street
giant Bear Stearns, the
size='3'>Washington Post reported today.
Paulson urged investment banks to provide more information about their
operations, especially since the Federal Reserve has begun to allow
these firms, for now, to borrow public money when they run short on
cash. He said the heightened oversight should also be temporary. The
Treasury will soon unveil a plan to streamline the regulatory system and
strengthen federal oversight of investment banks and the esoteric
instruments they sell.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/03/26/AR2008032601097_pf.html'>Read
more.
name='3'>Senate Banking Committee to Hold Hearing on JPMorgan-Bear
Stearns Deal
Senate Banking Committee
Chairman
size='3'>Chris
(D-Conn.) said yesterday that JPMorgan Chase & Co.'s bid to acquire
Bear Stearns Cos. Inc. raises regulatory and
American taxpayer concerns and that the committee would be holding a
hearing to investigate the deal, Reuters reported. Dodd said that he
invited Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry
Paulson and Securities and Exchange Commission Chairman
size='3'>Christopher Cox to
testify at an April 3 hearing to examine their roles in the transaction.
He also invited JPMorgan Chase Chief Executive Jamie Dimon and Bear
Stearns CEO Alan Schwartz to testify to explain the transaction, which
kept Bear Stearns from entering bankruptcy. Dodd also wanted a 'thorough
accounting' of the securities assets the Fed is guaranteeing with public
funds, including a chronology and rationale behind selecting those
assets.
href='http://news.yahoo.com/s/nm/20080326/bs_nm/bearstearns_congress_dodd_dc_2'>Read
more.
In related news, the
leaders of the Senate Finance Committee yesterday also asked for more
details on the taxpayer-backed sale of investment firm Bear Stearns to
JPMorgan Chase, The
Hill reported today. In a joint letter,
committee Chairman Max Baucus (D-Mont.) and ranking Republican Charles
Grassley (R-Iowa) asked the key players in the deal for information
about the negotiations and the final agreement. Specifically, the
senators want a “memorandum on the transaction detailing all steps
taken to date and steps that remain to be taken,” a list of all of
the parties and their negotiators involved, and “copies of all
documents that have been or that the parties intend to file with the
U.S. Securities and Exchange Commission or any other regulatory body and
any term sheets that relate to the transaction.”
href='http://thehill.com/leading-the-news/baucus-grassley-want-answers-on-bear-stearns-deal-2008-03-26.html'>Read
more.
name='4'>Enron, Citigroup Settle Bankruptcy Claims for $1.6
billion
Failed energy company Enron
Corp. announced yesterday that it had reached a settlement agreement
with long-time adversary Citigroup, Inc., Marketwatch.com reported
yesterday. Enron said that the settlement ends its long running suit
filed against 11 banks in 2003 after the firm's collapse into bankruptcy
two years earlier. The Enron Creditors Recovery Corp. had sued most of
the banks for their roles in the firm's collapse and received almost
$1.8 billion from the other 10. Under the terms of the deal, Citigroup
will pay $1.66 billion in cash to Enron, with a distribution date of
April 1. Citigroup also agreed to drop any existing claims or
counterparty litigation worth around $250 million. Citigroup will also
release an additional $1.7 billion in cash to be held in a disputed
claims reserve, which will be available to creditors subject to
bankruptcy court approval.
href='http://www.marketwatch.com/news/story/enron-citi-settle-bankruptcy-claims/story.aspx?guid=%7BC21F8219-31F9-455A-A8F1-744F53E1DB74%7D'>Read
more.
face='Times New Roman' size='3'>
name='5'>Massachusetts
size='3'> Joins Opposition to
w:st='on'>
size='3'>Sale of W.R. Grace
Sites
The Massachusetts
Department of Environmental Protection has joined the federal government
in objecting to W.R. Grace & Co.'s plan to sell off polluted
industrial sites through its chapter 11 proceedings,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Massachusetts Attorney General Martha
Coakley said in an objection filed onTuesday that the company didn't
adequately address how the Environmental Liability Transfer plan might
affect the
size='3'>Wells
face='Times New Roman' size='3'>G&H
size='3'>Aberjona
face='Times New Roman' size='3'>River
size='3'>Valley
size='3'>Woburn
w:st='on'>
size='3'>Mass.
Superfund site is among 10 properties that W.R. Grace wants to sell to
Environmental Liability Transfer Inc., an environmental acquisition
development company based in
w:st='on'>St.
Louis
decree with the state and federal governments, W.R. Grace has
responsibilities for remedial actions at the
w:st='on'>
size='3'>Woburn
regardless of who owns the property, the objection says.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=51126'>Read
more. (Registration required.)
name='6'>Federal Jury Convicts National Century
Executive
A federal jury yesterday
convicted the founder of a failed health care company of trying to bribe
a witness in an upcoming $1.9 billion fraud trial, the Associated Press
reported yesterday. The jury took one day to deliver its decision
against Lance Poulsen, former CEO of National Century Financial
Enterprises, described as the nation's largest health care financing
firm prior to its 2002 bankruptcy. Poulsen was accused of offering a
former company executive $500,000 to give misleading testimony during
Poulsen's fraud trial, scheduled for August.
href='http://biz.yahoo.com/ap/080326/national_century_founder.html?.v=2'>Read
more.
name='7'>Disney Store Operator Files for Chapter 11
Hoop Holdings, a unit of
Children's Place Retail Stores Inc. and the operator of Disney Store
North America, said late yesterday that it filed for chapter 11
protection, MarketWatch.com reported yesterday. Children's Place, the
Secaucus, N.J., retailer of apparel and accessories for kids, said it
isn't part of the chapter 11 petition, filed in U.S. Bankruptcy Court
for the District of Delaware. Children's Place said that it was in
advanced negotiations to sell a substantial part of the Disney Store
business to Walt Disney Co. Hoop designs, contracts to produce, and
sells merchandise under the Disney Store brand name via a license from
Walt Disney. To facilitate its chapter 11 efforts and ultimately wind
down its business, Hoop said it has received $35 million of
debtor-in-possession financing from Wells Fargo.
href='http://www.marketwatch.com/news/story/disney-store-unit-retailer-files/story.aspx?guid=%7b6D7E19C4-8684-4B8D-A6F4-BDB6A9FB3714%7d&dist=hplatest&print=true&dist=printTop'>Read
more.
PBGC
Objects to Reorganization Plans for Pacific Lumber Unit
The Pension Benefit
Guaranty Corp. (PBGC) has lodged a formal objection to a slew of
reorganization plans filed in the bankruptcy of Pacific Lumber Co.
subsidiary Scotia Pacific Co. LLC, claiming that none of the documents
adequately addresses the claims of the pension fund,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The PBGC objected to the first amended
chapter 11 plan for Scopac, which was proposed by Bank of New York, the
indenture trustee for the timber notes. The PBGC also objected to the
first alternative reorganization plan filed by Scopac itself, the third
amended joint reorganization plan proposed by the debtors and creditor
Maxxam Inc. and the first alternative reorganization plan for Scotia
Pacific parent company Palco. PBGC has filed six claims against all six
debtors involved in the Pacific Lumber case, for a total of $21.7
million. The pension fund claims that the four plans to which it has
objected are “fatally deficient” with respect to its
claims.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=51159'>Read
more. (Registration required.)
Gives Kara More Time to Rebut Claims
Bankruptcy Judge
Michael Kaplan
size='3'>pushed back the deadline for bankrupt Kara Homes Inc. and
liquidating trustee Bernard Katz can protest claims against the
estate, Bankruptcy
Law360 reported yesterday. The bar date for
claims objections will now be postponed more than three months, rather
than the original March 29 deadline set by the court. Judge Kaplan also
gave Kara permission to group claims that involve similar issues of law
and fact in omnibus objections to help streamline the process, according
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=51124'>Read
more. (Registration required.)
name='10'>President Bush Names New FTC Chairman
The White House named
William E. Kovacic as the next chairman of the Federal Trade Commission,
to succeed Deborah Platt Majoras when she resigns at the end of the
month, the Associated Press reported today. Kovacic has served as one of
the agency’s five commissioners since January 2006 and will be one
of two remaining Republican commissioners after Majoras leaves. Kovacic
served as the agency’s general counsel from 2001 through 2004 and
practiced antitrust law for the
w:st='on'>
size='3'>Bryan
face='Times New Roman' size='3'>Cave
law firm in the 1980s. He also taught at
size='3'>George
face='Times New Roman' size='3'>Washington
size='3'>University
w:st='on'>
size='3'>Law
face='Times New Roman'
size='3'>School
1999 until his appointment to the FTC. His appointment as chairman,
which does not require Senate confirmation, will take effect March 30.
href='http://www.nytimes.com/2008/03/27/business/27ftc.html?ref=business&pagewanted=print'>Read
href='http://www.nytimes.com/2008/03/27/business/27ftc.html?ref=business&pagewanted=print'>