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June 22, 2007
name='1'>Investors’ Suits Face Higher Bar, Justices
Rule
The Supreme Court dealt a
blow yesterday to investors who want to sue companies and executives
because of suspected fraud, setting a higher standard for class-action
lawsuits to go forward, the
size='3'>New York Times reported today. By a
vote of 8 to 1, it said that investors must show “cogent and
compelling” evidence of intent to defraud — a standard that
makes it easier for companies and their executives to get shareholder
complaints dismissed. The appeal involved a securities fraud complaint
against Tellabs Inc., a maker of equipment for fiber optic networks, for
financial statements made by senior executives that turned out to be
overly optimistic. Investors accused the company and top executives,
including Richard C. Notebaert, then the chief executive, of overstating
projections of revenues and demand for products. A federal appeals court
in
size='3'>Chicago said that
cases should go to trial if “a reasonable person could infer that
the defendant acted with the required intent.” But the Supreme
Court ruling said that the bar should be higher. The decision was
the second one this week by the court that was a defeat for shareholders
and a victory for the defendant companies. On Monday, the justices ruled
that securities underwriters on Wall Street are generally immune from
civil antitrust lawsuits.
href='http://www.nytimes.com/2007/06/22/washington/22bizcourt.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='2'>Ritchie Capital Units File for Chapter 11
Facing a liquidity crisis, two
Irish investment companies established by hedge fund
face='Times New Roman'>Ritchie Capital Management LLC to
invest in life insurance policies have filed for bankruptcy,
Bankruptcy Law360
reported yesterday. Ritchie Risk-Linked Strategies
Trading (
size='3'>Ireland) Ltd. and
Ritchie Risk-Linked Strategies Trading (
w:st='on'>
size='3'>Ireland
II Ltd. filed voluntary petitions for chapter 11 on Wednesday in the
U.S. Bankruptcy Court for the Southern District of New York. The
Risk-Linked funds have acquired a $30 million debtor-in-possession loan
from ABN Amro Bank NV. The funds have listed combined liabilities of
over $811 million, and although their assets are listed as unknown, they
are estimated to be over $100 million. The case
size='3'>is Ritchie Risk-Linked Strategies Trading (
w:st='on'>
size='3'>Ireland
Ltd., case number 07-11906 in the U.S.
Bankruptcy Court for the Southern District of New York.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=27500'>Read
more. (Registration required.)
Finds that Incomes Suffer More Volatility
Three economists, including two
from the Federal Reserve, have found that American families today are
more likely to experience big drops in their income than three decades
ago, the Wall Street Journal reported today. The authors of the
new study, Douglas Elmendorf of the Brookings Institution and senior Fed
economists Karen Dynan and Daniel Sichel, caution against interpreting
their findings as evidence that families face more risk of hardship than
before. The study found that the volatility of household income rose 23
percent between the early 1970s and early 2000s. The probability that a
family will experience a decline in annual income of 50 percent or more,
compared with their average income in the previous three years, rose to
1.8 percent in 1995 from 0.6 percent in 1973. After 1995, the
probability dipped, and has risen back to 1.7 percent.
href='http://online.wsj.com/article/SB118246796575444137.html?mod=home_whats_news_us'>Read
more. (Registration required.)
name='4'>Auto Workers Meet as
face='Times New Roman' size='3'>Delphi
size='3'>and GM are Close to Deal
Delphi Corp. and former
parent General Motors Corp. are close to an agreement with the United
Auto Workers union that would pave the way for the auto-parts supplier
to emerge from bankruptcy this year, Bloomberg News reported
today. A deal at
w:st='on'>
size='3'>Delphi
of parts, would wind down a two-year dispute that has threatened GM with
a costly strike. GM CEO Rick Wagoner said this month that he wanted
a
size='3'>Delphi
own labor talks with the UAW start next month. GM has lost more than $12
billion in the past two years. Today's meeting comes four days after UAW
President Ron Gettelfinger and Vice President Cal Rapson told union
leaders in
size='3'>Detroit
and ratify a new agreement before
face='Times New Roman' size='3'>Delphi
size='3'>closes its factories for a two-week summer shutdown on July
2.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=a_y5gfR9qODg'>Read
more.
Five
Settle SEC Musicland Insider Trading Charges
Tthe U.S. Securities and
Exchange Commission said Wednesday that final judgments have been
entered against five defendants implicated in an alleged insider trading
scheme involving Musicland Stores Corp.’s acquisition by Best Buy
Co Inc. in 2000,
size='3'>Bankruptcy Law360 reported yesterday.
The final judgments, including various disgorgements and civil penalties
for each defendant, were entered in the U.S. District Court for the
District of New Jersey on Tuesday and last week. All five defendants
were implicated as part of an insider trading ring centered around
Musicland’s largest shareholder at the time, Alfred S. Teo, Sr.
The SEC accused Teo of acquiring material, nonpublic information about
Best Buy’s tender offer for Musicland in the fall of 2000. Teo
then allegedly passed this information along to various friends, family
and colleagues who purchased Musicland stock prior to the
company’s Dec. 7, 2000 announcement of the Best Buy
acquisition.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=27486'>Read
more. (Registration required.)
name='6'>Commentary: Fixing the College Loan Mess
Congress has reacted to
the problems in the college loan industry with several strong
proposals that would go a long way toward ending corruption while making
loans more affordable for students and taxpayers, according to a
New York Times
size='3'>editorial today. The House has passed a bill that would make it
a crime for lenders to solicit business by offering college officials
anything of value and force lenders to disclose any existing deals. Both
chambers are also on the verge of approving legislation that would cut
some $19 billion in subsidies to the Federal Family Education Loan
Program. Under that program, the government pays commercial lenders to
make loans to students and protects them from defaults. The money saved
by cutting subsidies would be spent on Pell Grants, need-based loans,
scholarships for aspiring teachers and loan forgiveness for graduates
who go into public service. The bill would also lift federal student
loan borrowing limits and cap payments at 15 percent of the
borrower’s taxable income.
href='http://www.nytimes.com/2007/06/22/opinion/22fri4.html?pagewanted=print'>Read
more.
Real Estate
name='7'>California
face='Times New Roman' size='3'>Real Estate Brokerage Firm Files for
Bankruptcy
The parent company of a
major
size='3'>San Jose,
w:st='on'>
size='3'>Calif.
estate brokerage has filed for bankruptcy, following the loss of a
franchise with Century 21 and a string of lawsuits involving homes
purchased with subprime loans, the
size='3'>San Jose Mercury News reported today.
Vision Quest 21, the parent company of Century 21 Su Casa, which at its
peak had nearly 300 sales agents, filed for chapter 7 bankruptcy this
month, listing 46 plaintiffs in lawsuits as creditors. Su Casa and
Vision Quest lost franchises in March after Century 21 Real Estate sued
the firms, alleging that they had failed to pay more than $1 million in
franchise fees. Vision Quest 21 and Century 21 Su Casa have faced a
number of lawsuits against some of the brokerage's real estate agents
over homes purchased with subprime loans.
href='http://www.mercurynews.com/ci_6201817?source=rss'>Read
more.
name='8'>Barclays Forecasts No `Material'
w:st='on'>
size='3'>U.S.
size='3'>Subprime Losses
Barclays Plc., the U.K.
bank vying to buy ABN Amro Holding NV, forecasts no “material''
losses on loans it made to Bear Stearns Cos. hedge funds that invested
in subprime U.S. mortgage assets, Bloomberg News reported today.
Barclays is among creditors of hedge funds run by Bear Stearns, which
plans to take on $3.2 billion of loans to stop creditors from seizing
assets, according to people with knowledge of the proposal. The funds
were hurt in March and April as defaults on subprime mortgages
increased. New Century Financial Corp.,
a
size='3'>U.S.
with a line of credit from Barclays, filed for bankruptcy in April as
rising interest rates and a slowdown in the
w:st='on'>
size='3'>U.S.
size='3'>housing market triggered loan defaults. Barclays said at the
time it wouldn't have “material losses'' on the $900 million of
mortgage loans to New Century.
href='http://www.bloomberg.com/apps/news?pid=20601102&sid=a.BN1Ga584go'>Read
href='http://www.bloomberg.com/apps/news?pid=20601102&sid=a.BN1Ga584go'>
Looks for Approval of Executive Bonuses
The Pacific Lumber Co.'s
(Palco) top officials, workers and a company subsidiary's forestry staff
would receive up to $3.4 million in bonuses if they can stem losses and
meet production and harvest goals under a plan submitted to the federal
court overseeing its bankruptcy case, the
size='3'>Eureka (Calif.) Times-Standard
size='3'>reported today. Palco CEO George O'Brien could receive $450,000
of that, and five other senior managers would get nearly $750,000 in
total if losses can be kept below $7.7 million for the year. Another 25
salaried employees would be paid an additional $635,000. Scotia Pacific,
Palco's landholding arm, would also realize bonuses for its executives
as Scotia Pacific Vice President Jeff Barrett could see $221,000 if
harvest goals of 64 million board feet of redwood are reached, while
another 14 employees would get $396,000. Up to $990,000 would go to
about 300 millworkers for Palco and Britt Lumber Co. if production goals
are met. If higher targets are achieved, the bonuses as part of the
incentive plan could go up, according filings in U.S. Bankruptcy Court
in
size='3'>Corpus Christi,
size='3'>Texas
href='http://www.times-standard.com/ci_6202954?source=most_viewed'>Read
more.
International
face='Times New Roman' size='3'>
name='10'>Asia
size='3'>'s Recovery from Financial Crisis Is
Uneven
While a plunge in the
Thai baht 10 years ago sparked a wave of recessions across
size='3'>Asia
bankrupting nations - putting millions out of work and shaking markets
around the world - the recovery has been uneven, the Associated Press
reported yesterday. Today, the region as a whole has bounced back from
the 1997-98 crisis and is better equipped to deal with financial
emergencies. Banking is more transparent, corporations are better
managed, poverty rates have dropped and the region's collective economic
growth has doubled. The three countries hit hardest by the crisis that
began July 2, 1997 – Thailand, Indonesia and South Korea –
have charted sharply divergent paths over the last 10 years, reflecting
their differing responses to the crisis and policies since then.
size='3'>South Korea
size='3'>, which received a humiliating $58 billion bailout arranged by
the International Monetary Fund, quickly cleaned up its banking system
and started reforming its heavily indebted family-owned
conglomerates.
size='3'>Indonesia, however,
has struggled and
w:st='on'>
size='3'>Thailand
size='3'>hovers somewhere in between.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/06/20/AR2007062001035_pf.html'>Read
more.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/06/20/AR2007062001035_pf.html'>